Lockdowns yet to dent new home lending while record refinancing hits

The total value of new loans rose in July, according to new ABS Lending Indicators data.

The increase in lending coincides with the start of the Sydney lockdown and a record volume of loans refinanced to a new lender.

New home lending increased by 0.2% from the month prior to reaching $32.12 billion in July.

The increase was largely driven by a rise in investment lending, with the value of new investment lending growth for the 9th consecutive month, rising by 1.8% in July to reach $9.35 billion.

Owner-occupied borrowing, which was down -0.4% over the month to reach $22.77 billion.

This was the second consecutive monthly fall.

The ABS Lending Indicators also show Australian mortgage holders managed to refinance $17.22 billion worth of loans to a new lender in July 2021.

Refinancing activity was up a whopping 59.9% from July last year.

Value of new home loans approved in July

Source: ABS Lending Indicators July 2021, released 2 September 2021, excludes refinancing, seasonally adjusted data. Monthly change is June 2021 to July 2021, and annual change is July 2020 to July 2021.

Owner-occupier first home buyers

Source: ABS Lending Indicators July 2021, released 2 September 2021, excludes refinancing, seasonally adjusted data.

Canstar analysis of

What the experts have to say:

Canstar Group Executive, Financial Services, Steve Mickenbecker said:

 “Lockdowns have only just dented housing lending with a modest increase in approvals in July, wholly driven by investors.

There has to be an expectation that August approvals will show a greater lockdown impact, with the number of auctions in Sydney nearly halving over the past few months, while Melbourne auction clearance rates have dived.

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Prior to this round of lockdowns the biggest questions were when or if we would see a property market correction. The threat of extended lockdowns in the country’s biggest property markets was hardly factored in, with the focus having been around affordability and sustainability in the face of closed overseas borders.

The speculation has now shifted to whether we will see a repeat of the last 12 months’ spectacular recovery out of the first lockdown.

Property prices are moderating but not correcting and at this stage vendors are holding the line in expectation that high vaccination rates will see the market return to business as usual.

Lending to first home buyers is up 36 percent on a year ago, but it’s lagging the 99% growth for investment and the 58 percent for owner occupiers overall.

The almost 7 percent fall in loans to first home buyers in July is not about lockdowns, rather a product of being priced out of the market as government incentives have wound down.

Refinance continues to boom, up 60 percent year on year, and why not when Canstar lists over 200 interest rates below 2 percent.”

RateCity.com.au research director, Sally Tindall, said the record high in refinancing comes on the back of some notable hikes to fixed rates, particularly among 4- and 5-year terms.

“The recent spike in refinancing is likely to be driven, at least in part, by a fear of missing out on a good rate,”

We expect this surge in refinancing to continue as mortgage holders in lockdown use this time at home to give their finances a spring clean.

According to the RBA, the average existing owner-occupier on a variable rate loan is paying 3.07 per cent, yet there are currently 181 mortgage rates on offer under 2 per cent.

If your mortgage rate starts with a ‘3’, it could be time to jump on the refinancing bandwagon or at least pick up the phone and haggle with your current lender,”

Investors continued to elbow out owner-occupiers in July, particularly those looking for their first home.

The sharp decline in first home buyers is concerning. They’re dropping out of heated auctions in droves, as bidding wars surge beyond their budgets,” she said.

It’s hard to see when first home buyers will make a comeback in this climate.

While growth in property prices is starting to slow, the asking prices are still too high for many Australians trying to get their first foot on the property ladder,” she said.

Summary of the ABS Lending Indicators July 2021 data reveals:

• The value of new loan commitments for housing in July reached $32.12 billion, down 0.2% from the month prior and 68.2% from July last year

  • The value of new loan commitments for owner-occupiers in July reached $22.77 billion, down -0.4% from the month prior but up 58.3% year on year

  • The value of new loan commitments for investors in July reached $9.35 billion, up 1.8% from the month prior and 98.7% year on year

• The value of refinancing to a new lender increased 6% month on month in July. Mortgage holders refinanced $17.22 billion worth of home and investment loans in July

• The value of owner-occupier construction lending fell by -4.7% in July to reach $2.47 billion, though is still up 45.1% year on year

• The number of owner-occupier first home buyer loan commitments fell by -6.8% from the month prior, to reach 12,930, however, the number of first home buyers remains 20.40% up year on year

• Owner-occupier first home buyer loan commitments accounted for 30.3% of all owner occupier commitments (excluding refinancing), in original terms.

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.