Home loan demand takes a tumble

November 09, 2017

Home loan demand has fallen over the month of September, new data has revealed.

According to the latest Housing Finance Data from the Australian Bureau of Statistics, 55,812 home loans were approved throughout September – down from 57,137 the month prior.

“This 2.3% drop in home loan demand was largely expected,” Mortgage Choice chief executive officer John Flavell said.

“The fact is, interest rates have now been sitting at historically low levels for over 12 months. When interest rates first started to fall, we saw a spike in the number of borrowers looking to get into the market and take advantage of the low rate environment.

“But, given that rates have been so low for so long, it is only natural that we would eventually see a slight reduction in the level of home loan demand.

“That said, it is important to note that home loan demand is still high by long term standards. While we have seen some of the heat come out of the market, the market certainly hasn't collapsed.

“Quite the opposite. Over the last three months, more than 55,000 home loans were approved on a monthly basis. The last time home loan demand was this strong for this long was back in early 2016.”

The latest Housing Finance data also revealed a drop in the value of total home loans written.

Throughout September, $32.5 billion in home loans were written – down 3.6% on the month prior. This drop could largely be attributed to the significant reduction in the value of investment loans written.

Over the course of the month, the total value of all investment loans written was $11.8 billion – down 6.2% on the prior month.

Once again, Mr Flavell said the data wasn't ‘surprising'.

“There has been a lot of policy and pricing changes in the investment mortgage market in recent months and this is, understandably, taking a toll on the market,” he said.

Looking ahead, Mr Flavell said he wouldn't be surprised to see another drop in home loan demand and the total value of home loans written next month.

“The latest data from CoreLogic found that property values recorded 0% growth over the month of October across the combined capital cities,” he said.

“Moreover, some markets, like Sydney, Darwin and Canberra, saw property prices fall last month. Knowing this, it is likely we may see another month of slightly subdued home loan demand.

“Regardless of what happens next month, it is important to note that home loan demand and property prices are still high by historical standards and are likely to remain so for the foreseeable future.”