Housing loan approvals lift as investors come back into the market

New housing loan approvals rose strongly in March, up 5.5% over the last month with around 55% of the increase driven by investors.

Contributing to the monthly increase was lending to investors, which saw a 12.7% increase from the month prior.

This was the 10th consecutive month that the value of new investor lending commitments experienced an increase and was the largest monthly increase since July 2003, almost 18 years.

Canstar analysis of the ABS Lending Indicator data reveals mortgage holders refinanced $13 billion worth of loans to a new lender in March 2021, down 1.6% from the month prior but up 21.8% year on year.

The data also shows refinancing with the same lender (internal refinancing) reached $8 billion in March 2021, up 28.9% from March 2020.

Summary of the ABS Lending Indicators March 2021 data reveals:

• The value of new loan commitments for housing in March increased to $30.2 billion, up 5.5% from the month prior while increasing 55.3% from March last year.

  • The value of new loan commitments for owner-occupiers in March increased to $22.4 billion, up 3.3% from the month prior and 55.6% year on year

  • The value of new loan commitments for investors in March reached $7.8 billion, up 12.7% from the month prior and 54.3% year on year

• The value of owner-occupier construction lending fell by 14.5% in March to reach $3.64 billion, though is still up 123.6% year on year.

• The value of external refinancing decreased by 1.6% from the month prior though remains up 21.8% from March last year. Mortgage holders externally refinanced $13 billion worth of home and investment loans in March 2021.

• The value of internal refinancing increased by 13.2% from the month prior and 28.9% from March last year (in original terms). Mortgage holders refinanced $8.4 billion worth of home and investment loans with their existing lender in March 2021.

• The number of owner-occupier first home buyer loan commitments fell by 3.1% from the month prior, to reach 15,623. The number of first home buyers is up 58.3% year on. year

• Owner-occupier first home buyer loan commitments accounted for 33.7% of all owner occupier commitments (excluding refinancing), in original terms.

An expert opinion

Canstar Group Executive, Financial Services, Steve Mickenbecker commented on the latest data:

“The low interest rate environment continues to frenzy home lending levels, with March values a massive 55.3 per cent over pre-COVID March 2020.”

“The pandemic saw the introduction of massive support measures for first home buyers and those constructing a home, as well as by way of lower interest rates. There is no question that the support measures have done what was intended.

“Lending to first home buyers is up 58.3 per cent on a year ago and continues to run at near record levels, representing 33.7 per cent of loans to homeowners.

“Construction has been running way ahead of traditional levels but could be expected to slow with the HomeBuilder grant now no longer available.

“Investors continue to accelerate their return to the market in force, increasing house price pressure and competition with first home buyers for the still fragile supply of houses on the market.

“People changing lenders have been less active than you would expect when there are 181 loans listed on Canstar below two per cent, disappointing if people are not taking advantage of low rates to get ahead.

“There are attractive fixed rates across the market and refinancing to a new loan with the same lender is up 28.9 per cent from last year, perhaps the path of least resistance for some borrowers.

“Much of the interest rate action in 2021 has been in fixed rates and for the first time in many months we’re seeing a higher number of rate increases and fewer rate cuts, a signal that we are near the bottom of the interest rate cycle.

“People don’t need to panic about rising rates just yet as there is still a wide range of rates starting with a one, making now a great time to lower your interest costs.”

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About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.