Owner-occupiers lead the charge in declining home loan demand

November 12, 2018

Home loan demand fell in September, according to new data from the Australian Bureau of Statistics (ABS), revealing some of the weakest demand in home lending in Australia in over four years.

The latest Housing Finance data from the ABS reveals that, in seasonally adjusted terms, 50,673, home loans were approved throughout September - down 1.0% from the month prior.

The data reveals that $29.1 billion worth of dwelling commitments were made over September, a reduction of 3.8% from the month prior, in seasonally adjusted terms. This included a 4.2% reduction in the value of owner-occupied housing commitments to $19.3 billion and a 2.8% reduction in the value of investment loans to $9.7 billion.

“In September we saw a decline in the number and value of home loans approved. In fact, September revealed the lowest monthly value of dwelling commitments since August 2014. Interestingly, this decline had been driven by investors in recent times but we are seeing a drop in owner-occupier demand as well,” said Mortgage Choice Chief Executive Officer, Susan Mitchell.

“Investor activity in the market had slowed considerably following APRA’s cap on investor loan growth. Looking ahead, there is speculation that investor borrowing could fall further if the Labor party’s proposed changes to negative gearing are put in place. As a tax concession, negative gearing assists investors enter the real estate investment market by reducing the cost of purchasing and servicing investment properties.

“Indeed, Mortgage Choice data shows investor borrowing has slowed however, there is potential for a short-term impetus from investors as we near the upcoming Federal election from investors who wish to secure the grandfathered tax concession.

“The significant drop in the value of owner occupier loans – 8% over two months, is likely being fuelled by a combination of factors such as tighter lending conditions and the reduction of activity in the Sydney and Melbourne housing markets which have the highest median dwelling values and consequently higher average loan sizes in the nation.”

CoreLogic’s Hedonic Home Value Index reported a 2.7% annual fall in national dwelling values in September, fuelled by a 6.1% drop in Sydney and a 3.4% drop in Melbourne over the year. 

Ms Mitchell said, “Softening house prices across the country should continue to support home loan demand from first home buyers across the country who may be able to take advantage of stamp duty concessions and first home owner grants. I expect these buyers to support owner occupied housing commitments over the medium-term.

“That being said, in an environment of tightened lending where Australian lenders are on a mission to scrutinise home loan applications, it has never been more important for first time borrowers and existing borrowers alike to seek expert advice when applying for housing credit.  

“A qualified mortgage broker can assist prospective home buyers and those looking to refinance into a new home loan by comparing the mortgage products of a variety of lenders to find a loan that is suited that borrower’s unique financial situation.

“The average Australian may not be aware that lenders are more demanding than ever and each lender has their own unique set of policies and preferences. The value of engaging a mortgage broker is that they are home loan experts who have an intimate knowledge of what lenders are looking for and are therefore able to secure borrowers a competitive home loan deal,” concluded Ms Mitchell.