Value of new home lending falls for the first time in 2021

The total value of new loans fell in June for the first time this year, according to new ABS Lending Indicators data.

There were $32.05 billion of new home loan commitments in June, down 1.6 per cent month-on-month, the biggest monthly drop since May 2020, according to seasonally adjusted data from the ABS

While the one-month fall comes off the back of a record high, it signals Australia’s home buying hysteria could be starting to lose some momentum.

The decline was largely driven by a drop in owner-occupied borrowing, which was down 2.5% over the month to reach $22.86 billion.

Investment lending bucked the trend, with the value of new investment lending growth for the 8th consecutive month, rising by 0.7% in June to reach $9.19 billion.

The vast majority of new lending resides with the major banks, with $17.05 billion worth of owner occupied loans and $7.31 billion of investment loans with the big four banks.

Experts' commentary

Canstar Group Executive, Financial Services, Steve Mickenbecker said:

“For the first time in eight months, new housing lending has retreated in June, coinciding with the start of Sydney’s recent COVID-19 outbreak. With the lockdown extending, you would have to expect a softer July coming next, as already foreshadowed by lower auction prices.”

First home buyers and loans for construction have slowed over the month as incentives wind back.

The investment market remains resilient, though also more subdued, and investors may view the softening in prices as a buying opportunity in anticipation of the same rebound we saw from the first lockdown in 2020.

We shouldn’t overestimate the depth of June’s fall, with the month still up 84 per cent a year ago, when we were in the depths of the first COVID-19 lockdown.

Homeowners have driven up refinancing over the month, by a huge $2.8 billion.

The opportunity to take advantage of the low-interest-rate environment to get ahead on the loan is drawing borrowers into the market. Canstar lists 181 loans below 2 per cent with 161 of these are fixed rates and 20 are variable rates.

In spite of many who wish to call the demise of the big banks, they still provide around three-quarters of new lending, currently buoyed by low fixed-rate loans to complement their ever strong brand and distribution advantages.”

Borrowers should not allow complacency to drive them into a loan with a known big bank brand.

Though the major banks' fixed rates are historically low, their lowest fixed rates still remain 10 to 20 basis points above the lowest in the market.

RateCity.com.au research director, Sally Tindall, said:

“While mortgage rates were still at near record lows, the meteoric rise in property prices could be starting to bite for some buyers.

Growth in home lending might finally be losing some steam as reality kicks in for buyers who can’t afford the eye-watering asking prices in Australia’s property hotspots.

First home buyers are the key casualties in the property price boom, as many don’t have the means to keep up with investors and existing owner occupiers.”

Ms Tindall said we wouldn’t see the impact of the latest wave of lockdowns until the release of the August ABS data, as new home loans typically take six weeks to settle.

It will be at least a couple of months before we see what impact the latest lockdowns have on the home lending market, however, there’s likely to be more twists and turns ahead.

Would-be buyers who have taken a pay cut during this lockdown could be forced to put their plans on ice for now, while those who’ve kept their jobs and are saving more money working from home, might now be willing to pay top dollar to get into a bigger property."

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.