New home loans being approved have seen their value dip for the ninth month in a row, alongside cooling prices, as the Reserve Bank’s aggressive rate hikes take their toll on the home lending market, according to RateCity.com.au.
In October, $25.79 billion worth of home loans were approved – that’s a 2.7% drop from the prior month in seasonally adjusted terms and the lowest value since December 2020, ABS data showed.
Also continuing its slide in October was the number of owner-occupier first-home buyer loans, which was down 3.2% from the previous month and down nearly 26% from the same period a year ago.
The value of externally refinanced loans across both owner-occupiers and investors, meanwhile, slipped for the second time but remains at extremely elevated levels, at a total $17.84 billion in the month of October.
The proportion of new and refinanced lending opting for a fixed-rate contract clocked in at just 4% again this month, in dollar terms – dramatic decline from the peak last July when 46% of all new and refinanced loans were fixed.
“Seven consecutive RBA hikes has borrowers spooked, and with another hike coming, potentially as soon as Tuesday, there’s likely to be further drops in lending to come,” said Sally Tindall, RateCity.com.au research director.
“Despite the recent rate rises, banks still have to stress-test people’s finances to make sure they can afford the mortgage if rates rose a further 3%, which is playing havoc on people’s borrowing capacity now the cash rate is almost at a 10-year high,” she said. “APRA may have to consider dropping this buffer back down to 2.5% in 2023, once it gets a clearer idea of where the cash rate is likely to settle. Refinancing might have dropped again this month but it’s still at near record highs, with over $17 billion worth of loans refinanced in just one month.”
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