Cooling prices bolster demand

July 17, 2018

Recent data could suggest that cooling property prices are bolstering sales in Australia’s residential property market. Prospective buyers who may have suffered from the fear of paying too much may be encouraged by falling property prices.

Property prices, particularly in the nation’s capital cities have come off the boil in recent times and new data would suggest that this is having an effect on the number of Australians applying for home loans.

The latest Housing Finance Data from the Australian Bureau of Statistics revealed that in seasonally adjusted terms, 53,037 home loans were approved throughout the month of May, an 1.1% increase on April.

“Indeed, the data showed that there was an increase in the number and value of home loans approved,” said, Mortgage Choice Chief Executive Officer, Susan Mitchell.

The data showed that $31.9 billion worth of dwelling commitments were made throughout May, an increase of 0.5% on the month prior.

“It may be too soon to tell if APRA’s removal of the cap on investor loans is having any effect on the increase in demand for this type of home loan,” said Ms Mitchell.

CoreLogic data revealed that in May, Australian dwelling values posted their first annual decline since 2012.

“In fact, national dwelling values slipped, led by a drop of 0.2% in Sydney and a 0.5% drop in Melbourne, which together have a significant effect on the national house market’s performance.

“This data is promising and suggests that housing affordability may be improving, enticing once cautious home buyers to enter the market, or property investors seeking a bargain,” said Ms Mitchell.

The latest Mortgage Choice national home loan approval data has revealed borrower preference may be starting to shift. An 11 month trend of variable rate preference could be coming to an end, with fixed rate home loans accounting for 18.67% of all loans written in June – up from 17.93% in May.

In the wider environment, a combination of factors, including an increase in wholesale funding costs, regulatory changes and tightening lending policies are having an effect on the overall cost of borrowing.

“Cautious borrowers who recently entered the market may be aware that despite a stagnant cash rate, lenders are increasingly making small, out of cycle rate increases on home loan products.

“These factors are pushing some borrowers who are increasingly wary of the financial impact from future rate rises to seek certainty by fixing their home loans.

“In fact, our national home loan approval data shows that borrower demand for fixed rate home loans rose slightly in June.

“That being said, variable rate home loans continue to be the most popular type of home loan products across the nation,” said Ms Mitchell.

Looking ahead, Ms Mitchell said a convergence of factors could urge more borrowers to fix their home loans in the coming months.

“In a complex lending environment, I would encourage prospective buyers to enlist the help of a qualified mortgage professional, who can help them navigate the home buying process.

“I would also encourage those who have not reviewed their home loan in the last 12 months to do so as soon as possible, as they may be able to switch to a better deal,” Ms Mitchell concluded.