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New home loan lending nose dives as property market cools

New home loan lending nose dives as property market cools

The value of new home loans has fallen by $2.13 billion in April, according to the ABS lending indicators released today.

New lending to owner-occupiers dropped by $1.57 billion month-on-month and is down $2.92 billion from a year ago, in seasonally adjusted terms.

Meanwhile, investor lending dropped by $557 million from the previous month, however, it is up $3 billion compared to April last year.

Value of new home loans approved in April
April total lending
Source: ABS Lending Indicators April 2022, released 3 June 2022, seasonally adjusted data. Annual change is April 2021 to April 2022. Excludes refinancing.

RateCity.com.au research director, Sally Tindall, said: “Buyers are retreating from the market as property prices begin to cool.”

“New lending has nose-dived as droves of potential buyers put their plans on ice while they wait to see what impact the interest rate hikes have on the property market,” she said.

“Investor lending has seen its biggest drop since May 2020, when buyers fled the market at the start of COVID when property forecasts looked bleak. 

“Many investors are shelving their plans once again while they see how high rates will go and whether the unfavourable property price predictions eventuate,” she said.

The number of first home buyers drops by 34% in a year

The number of owner-occupier first home buyer loans has dropped by a staggering 34.3 per cent in April compared to a year ago.

Month-on-month the number of first home buyers is down by 4.4 per cent.

Owner-occupier first home buyers in April

First home buyersss

Source: RateCity.com.au. ABS Lending Indicators April 2022, released 3 June 2022, seasonally adjusted data.

Sally Tindall said: “It’s been a tough slog for first-home buyers trying to get into an overinflated property market, so it’s no surprise to see these numbers dwindle”.

“While it has been a bleak year for first home buyers, with investors now retreating, they may finally get foot in the door in the coming months if prices drop.

“The new government’s programs, which include the Help to Buy and the Home Guarantee scheme, will get some people onto the property ladder. However, buyers need to be aware of the risks of purchasing a new home in a falling property market with a small deposit,” she said.

New fixed rate lending continues to slide as rates rise

“With fixed rates rising rapidly, the number of borrowers choosing to fix their loan has continued to plummet,” said Sally Tindall.

“The proportion of fixed loans funded in the month of April was just 16 per cent; down from the peak in July 2021 where 46 per cent of all new loans were fixed.

“The big four banks’ average lowest 3-year fixed rate has risen by almost 3 per cent in the last year. It’s no wonder Australians have turned their back on fixing”, she said.

Fixed v variable april graph
Source: RateCity.com.au. ABS Lending Indicators April 2022, released 3 June 2022, seasonally adjusted data.

Average national mortgage size now almost 20% higher than two years ago

The national average new loan size for owner-occupier dwellings is now $611,154, which is almost $100,000 more than it was two years ago.

In NSW, the average mortgage size is over $140,000 more than it was in April 2020 and in Victoria it’s up by more than $106,000 in this time.

In Queensland, the average mortgage size is 28.7 per cent higher than it was two years ago, while the biggest percentage increase was in Tasmania where it has risen by 35.9 per cent.

However, with property prices expected to drop in the coming months, it is likely the average new loan size will also come down.

Average new owner-occupier loan size

Loan size state by state
Source: ABS lending indicators, April 2022, original data for owner-occupier dwellings. Includes construction and the purchase of new and existing dwellings.

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This article was reviewed by Data Research Specialist Piyush Pillai before it was published as part of RateCity's Fact Check process.

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