New home lending up, while Aussies refinance $74.1 bn in loans during pandemic

New ABS Lending Indicators data released today shows new home lending rose in August, despite the fact that Melbourne, the country’s second largest property market is in lockdown.

The value of new home lending increased by 12.6% in August, following an 8.8% rise in July based on seasonally adjusted figures.

This has been the largest monthly increase since records began in 2002.

The strong demand is being driven by owner-occupiers, in particular first home buyers.

The value of housing finance commitments to investors was up 9.3% over August but remains down 4.3% year on year.

Canstar analysis of the ABS data also shows the total value of homeowners refinancing to a new lender in August is down 7.4% from the month prior, which is the third consecutive month it has fallen.

However, this comes off a high base following a record number of Australian homeowners refinancing in May as they cut costs to cope with the pandemic.

From March to August, a total of $48.9 billion in owner occupied home loans were refinanced.

Investors are bucking the trend, with the value of investors who have refinanced their loans in August up 2.1% since July. From March to August, investors have refinanced a total of $25.2 billion loans.

A summary of the ABS Lending Indicators August 2020 data reveals:

• The value of new loan commitments for housing in August rose by $2.4 billion, up 12.6% from the month prior and 19.3% from August last year 

• The value of external refinancing was down 4.2% from the month prior, but up 22% from August last year

• From March to August the total value for owner occupied home loans and investment loans refinanced since the pandemic comes to $74.1 billion

• The value of external refinancing for owner occupied homeowners was down month on month by 7.4% in August, while the value for investors refinancing was up 2.1%

• The value of owner occupier first home buyer loan commitments rose 18.4% from the month prior, while the number of owner occupier first home buyer loan commitments rose by 17.7%, reaching the highest number since October 2009

• Owner occupier first home buyer loan commitments accounted for 34.2% of all owner occupier commitments (excluding refinancing), in original terms.

Note: The above figures are all in seasonally adjusted terms unless specified.

Canstar finance expert, Steve Mickenbecker, comments on the data:

“Australia’s property market is showing amazing resilience with new housing loan commitments up in August in spite of Melbourne's lockdown,” said Mickenbecker.

“The Melbourne lockdown may still see a slowdown in lending in coming months given the lag-time between house purchase and loan settlement.

“Refinancing is down from July with the third straight fall from the huge spike in May, but it is still in vogue being up 22% on August last year.

“With interest rates starting to drift below 2%, refinancers are taking advantage of a massive savings opportunity.

“Low interest rates combined with the tax cuts brought forward in the Federal Budget, give homeowners who have held onto their incomes an unprecedented opportunity to get the household budget into good shape. To take full advantage they may have to refinance with a new lender.

“First home buyers are flooding into the market, having responded to Government support measures. The number of new loan commitments in August for first home buyers have hit the highest level since October 2009.

"With house prices falling well below expectations, first home buyers’ fear of missing out might be starting to resurface in spite of the current uncertainty.

“Investment lending remains in the doldrums, with investors spooked by high vacancy rates and the prospect of low population growth and tourist and student visitors. Investors have, however, been active with refinancing taking advantage of lower rate loans.”

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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.