New data from the Australian Bureau of Statistics (ABS) puts the number of home loan commitments at the lowest level in almost two years.
The most recent ABS
Housing Finance report states that the number of loans for owner-occupiers dropped by 1.9% in April to 53,062. Just under 44,500 of these were for the purchase of established dwellings.
The value of total dwelling commitments also dropped by 1.6% across April to just under $32.5bn. Of this, $19.9bn was for owner occupiers (down by 1.1%) and $12.6bn was for investors (down by 2.3%).
This is evidence that the market is softening, said Craig James, chief economist at CommSec.
“The number of new loans by home owners fell to a near two-year low, and investor home loans hit a seven-month low.”
However, he pointed out that home loans to finance the construction of new homes have reached a 16-month high – increasing by 2.1% to 5,864 – with the value of these loans rising by 2.3% to just over $3bn – the highest level in seven and a half years.
“No one wants to stop people building homes for the purpose of living in them as opposed to renting them out. In simple terms the aim is to have supply equalling demand.”
From trends in fixed rate loans, James suggested more home buyers believed that rates had already bottomed out.
“Data shows that the proportion of loans which are fixed-rate loans hit 3½-year highs in April. In practice, the Reserve Bank isn’t preparing to either lift or cut rates.”
Mortgage Choice chief executive officer John Flavell said that although these figures indicated a consecutive three-month drop in the number of home loan approvals, this was to be expected.
“This slight drop in home loan demand isn’t all that surprising when you consider that Australia’s lenders have been seriously tweaking their pricing and policy in recent months. This added level of complexity in the home loan market has subsequently caused demand to slide slightly.”
The decrease in home loan values was also anticipated with the market cooling down as Australia headed into the winter months.
Looking ahead, Flavell expected home loan demand to remain strong despite the added complexity in the market.
“Interest rates remain at historical lows, which keeps the cost of borrowing at affordable levels and this will keep demand relatively strong.”
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