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Low interest rates and FOMO drive home lending to new high in December - featured image

Low interest rates and FOMO drive home lending to new high in December

The value of home loans settled in the month of December has hit another record high, thanks to record-low rates, generous government incentives and borrowers’ fear of missing out.

Data out today dovetails with CoreLogic’s national home value index, which are now above pre pandemic levels and hit a record high in January.


The latest ABS lending indicators showed the total value of owner-occupier home loans settled in December was $19.94 billion – a record high – up 38.9 per cent, year-on-year, in seasonally-adjusted terms.

Overall, lending to households also hit a new record high of $26.01 billion, up 31.2 per cent year-on-year.

Housing Loan Approvals Feb 1 2021Housing Loan Approvals By State

While owner-occupier loans continue to drive most of the recovery (up 8.7% m/m and +38.9% y/y), investor activity is starting to lift (+8.2% m/m and 10.9%y/y)

The increase was broad based across the states with a very large gain in VIC (+20.1% m/m) as the state emerged from lockdown from mid-October with pent-up demand.

Investor Loan Approvals By State

What this means:

  • The data supports other indicators of a strong rebound in housing market activity. A lift in construction finance and the extension of the HomeBuilder grant to March 2021 is also likely to further support detached dwelling construction. Houses Property Market
  • The strong lift in housing market activity is  expected to flow through to stamp duty revenue for state governments with potential implications for issuance needs. A prospective recovery in stamp duty revenues is also occurring given payroll wages have returned to pre-pandemic levels across most states.
  • The recent lift in the fixed rate share of new home loans is being sustained and now hovers around 35%.

Sally Tindall, research director at, said data from Core Logic and ABS showed both property prices and home lending had hit new record highs.

“Record low rates are fuelling the boom in home lending, alongside targeted government incentives and a fear of missing out, particularly among first home buyers who are now watching property prices tick up,

While first home buyers have continued their surge onto the property scene, investors are also starting to make a comeback, adding more competition in an already crowded market where in many locations, stock is in short supply.

NSW’s proposed changes to stamp duty, if implemented, will give local first home buyers another boost, as it allows potential buyers to redirect upfront stamp duty costs towards their deposit.  Market

While it’s great to see first home buyers finally getting a foot in the door, buyers should think long-term when deciding how much to borrow.

The issue facing us in 2021 clearly isn’t a slump in the market, but a potential spike, which could push people into borrowing more than they can afford, particularly if the government’s proposed changes to responsible lending go ahead.

The government’s argument that we need to free up the flow of credit makes zero sense in the face of today’s figures. If anything, the regulators will be looking to put new restrictions on risky lending through caps on low deposit loans and loans with high debt-to-income ratios if the market continues to soar.

It’s up to the parliament to knock the responsible lending changes on the head. The last thing we want is for people to be pushed into loans they can’t afford to repay in a heated property market,”

Canstar Group Executive, Financial Services, Steve Mickenbecker says

“The volume of new home lending shows a strong vote of confidence in a bullish outlook for the property market in 2021 with no signs of it slowing down.

The end of home loan repayment pauses and JobKeeper will still present a headwind in March, but the current momentum of the property market is such that any slowdown or correction is looking likely to be shallow and short lived.

Supply of property for sale is still constrained, with listings in some capitals down 30% on January 2020, and until more sellers can be encouraged into the market we will continue to see prices on the up.

First home buyers and home builders continue to rush into the market, encouraged by record low interest rates and the generous government incentives.

Fear of missing out is driving first home buyers into lower equity entry for property ownership, and government incentives are encouraging them to the outer suburbs and new housing construction.

Even investors are coming to the party, with December confirming the turnaround we saw in November with a 10.9% rise above pre-COVID-19 December 2019 of new investors in the market.

The Northern Beaches lockdown that began in December did nothing to slow the pace of the property market in New South Wales. In December, New South Wales recorded the largest value of new lending since reporting began back in 2002 reaching $6.45 billion.

Switching lenders is up again for the month and 9% ahead of last year, with encouragement coming from even the big banks who are competing hard on price with very sharp fixed interest rates.

In spite of the extraordinarily low interest rates on offer, only 24% of mortgage holders refinanced or renegotiated their home loan in 2020, according to Canstar’s survey of 554 borrowers late last year.”

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metrople Team

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About Kate Forbes is a National Director at Metropole assisting our high net worth clients safely grow, protect and pass on their wealth. She has 25 years of investment experience in financial markets on two continents, is qualified in multiple disciplines, and is also a Chartered Financial Analyst (CFA).
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