Home lending decline has further to go: economist

The value of new loan commitments for housing fell 8.2% in September, to $25.1bn, the latest Australian Bureau of Statistic figures show.

The September figures, released by ABS on Wednesday, mark four months of consecutive falls, including a  3.4% fall in August, an 8.5% fall in July and a 4.4% fall in June. 

The number of loan commitments to owner-occupier first-home buyers dropped 8.3% in September, following a 10.4% increase in August, showing fewer Australians were getting onto the property ladder.

According to the ABS, the fall in new loan commitments to owner-occupier first-home buyers was seen across all states, and the ACT. 

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First-home buyer loans remained well below the January 2021 peak, the ABS said. Over recent months, levels of first-home buyer loans were similar to those seen in 2019, it said.

ABS finance and wealth spokesperson Katherine Keenan said the value of new owner-occupier loan commitments fell 9.3% in September, and the value of new investor lending fell 6%.

Although housing lending fell over four consecutive months, the value of loan commitments in September was well above pre-pandemic levels, she said.

“Owner-occupier loans in September were 23% higher than in February 2020, while investor loans were 60% higher,” Keenan said.

Bluestone Home Loans consultant economist and My Housing Market chief economist Dr Andrew Wilson (pictured above) said overall, the falls in home lending were not a surprise.

The September data showed a sharp decline across the board for all buyer types, he said.

Wilson acknowledged that the September data is likely to have reflected the outsized, 50-basis-point hikes to the official cash rate over the months of June to August.

“Home lending data falls [were] across the board (owner-occupiers, investors and first home buyers) and reasonably significant falls as well,” Wilson said.

Responding to the discrepancy in the 10.4% increase in first home buyer commitments in August, as opposed to an 8.3% drop in September, Wilson said it was important to bear in mind that earlier figures included seasonal adjustments applied through COVID-19, and that reporting was now reverting back to standard methodologies.

The expansion of the Home Guarantee Scheme, (35,000 places each financial year to support first-home buyers with deposits from 5%), announced on July 1, was possibly also a driver of increased first-home buyer activity over August, Wilson said.

“Because there’s a fixed amount of places on offer, perhaps we did see a rush through August, reflecting the July uptake,” Wilson said.

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Compared to other buyer groups, Wilson said first-home buyers tend to be more immune to lower house prices and were more interested in maximising their deposit.

“We shouldn’t expect over the longer term as prices continue to fall that first-home buyers won’t be interested in the market – however, the offset to that is they have to pay more for their mortgage,” Wilson said.

First-home buyers (as with all buyers) were supported by a full-employment economy (record-low unemployment) and rising wages, he said.  On the other hand, rents are rising strongly, which is both an incentive and a constraint, as paying higher rent impacts deposit savings.

“Any sort of sense that maybe we were starting to head towards a trough in a decline in home lending generally, was put to bed with today’s numbers, which show a severe decline again,” Wilson said.

The value of borrower refinancing of owner-occupier housing loan commitments between lenders fell 7.2% in September, to $11.9bn, 15% higher than a year ago, ABS said. The September fall followed a 2.8% rise in August, to an all-time high of $12.8bn, ABS said.

At a national level, the average loan size for owner-occupier dwellings, including construction and the purchase of new and existing dwellings, fell slightly in September, from $589,000 to $588,000 (in original terms). Loan sizes remained 23% higher than February 2020, it said.