More pain to come as latest rate rises take effect
New home loans for owner-occupiers tumbled to their lowest level in two years in September thanks to climbing interest rates and the sting of continued cost-of-living pressures, according to new data from the Australian Bureau of Statistics.
Monthly new home loan commitments for owner-occupiers fell 9.3% – the largest monthly decline in at least 20 years – to a seasonally adjusted $16.8 billion, the lowest total since August 2020, according to a report by The Australian Financial Review.
First-home buyer mortgage commitments dropped 6.8% in value to $4.1 billion, the lowest since June 2020, and new investor borrowing slid 6% to $8.3 billion, the lowest level in a year. And those figures are for September – two rate hikes ago.
September was the month the RBA lifted rates for the fifth consecutive time. On Tuesday, the central bank hiked rates for the seventh straight month, bringing them to 2.85%. The lag time between rate decisions and higher mortgage payments means that home loans will decline even further, AFR reported – and so will dwelling prices.
“The deterioration in credit availability will continue, which will drag on the demand for new and existing housing to mid-2023,” BIS Oxford Economics senior economist Maree Kilroy told AFR. “We ultimately expect a nationwide all-dwelling median price peak-to-trough fall of 11.5%.”
Brisbane saw the fastest drop in dwelling values of any capital city last month, dropping 2%, according to CoreLogic data. Separate figures from SQM Research showed that the number of distressed listings nationwide has spiked by more than 15% since May.
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Meanwhile, the ABS recorded a decline in new dwelling approvals – and rising interest rates and weaker housing prices are likely to drag those numbers even lower, AFR reported.
Total new dwelling approvals dropped 5.8% in September from August, with detached houses falling 7.5% and attached dwellings dropping 3.1%.
Kilroy said detached home approvals would likely weaken further next year.
“Beyond the sizeable backlog of work already committed, the outlook darkens medium-term,” she said. “It has become increasingly difficult for new projects to gain traction, which will drag on approval volumes in 2023.”
