Car loan commitments crash in April, first home buyers exit market

author-avatar By on June 10, 2020
Car loan commitments crash in April, first home buyers exit market

Photo by Sai Kiran Anagani on Unsplash

The value of loan commitments for fixed-term personal finance fell by 24.8% in April, seasonally adjusted - a record-breaking fall.

The figures from the Australian Bureau of Statistics (ABS) paint a dismal picture for the automotive industry, who had already been seriously affected by the COVID-19 pandemic. 

ABS Chief Economist Bruce Hockman said car loans were the main driver of the record-breaking decline in personal finance. 

“This was the largest fall in the history of the series, which started in July 2002, and was driven by a 37.8% fall in the value of loan commitments for road vehicles," Mr Hockman said. 

“Lending institutions reported that COVID-19 impacts were being seen through both reduced demand from borrowers and tighter lending criteria.”

Personal finance also fell by 8.2% in March, with lending for vehicles down 10.2%.

In the market for a new car? The table below features car loans with some of the lowest fixed interest rates on the market. 

Lender
Advertised rate Comparison rate Monthly repayment Interest TypeVehicle TypeMaximum Vehicle AgeOngoing FeeApplication FeeTotal RepaymentEarly RepaymentInstant ApprovalOnline Application

FixedNew1 yearMore details

Green Car Loan

FixedNew2 yearsMore details
QUICK APPLICATION PROCESS WITH NO FEES

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
QUICK APPLICATION PROCESS WITH NO FEES

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
FixedNew1 yearMore details
No ongoing fees

Plenti Car Loan

No ongoing fees

Plenti Car Loan

    FixedNew, Used5 yearsMore details

    Fixed Car Loan (with Low Emission Vehicle discount)

    Base criteria: fixed and secured car loans for 'low emission' cars. Data accurate as at 01 September 2020. Rates based on a loan of $30,000 for a five-year loan term. Products sorted by advertised rate. Repayments are calculated based on advertised rates. Rates correct as of October 28, 2021. View disclaimer.

    New home loan commitments also suffered a decline as a result of the pandemic in April, after being up 2.5% in March. 

    The value of new commitments for owner-occupied housing fell 5.0%, while investor housing fell 4.2%. 

    It was the largest fall of new home loan commitments for both groups in 12 months.

    Additionally, the purchase of existing dwellings experienced the largest fall in over a decade. 

    In a show of weaker confidence in the market, first home buyers also exited the market, with new loan commitments down 3.8% after a marginal increase in March.

    Owner-occupier first home buyers accounted for 32% of all owner-occupied loan commitments, a steady result from the previous month. 

    Despite April's fall in new commitments for owner-occupier first home buyers, the series remained 20.2% up on the most recent low point in December 2018.

    Mr Hockman said a build-up of loans in the pipeline meant the figures didn't show the full extent of declines in home loan commitments. 

    “COVID-19 operational impacts experienced by some lending institutions resulted in a backlog of March housing loan applications being processed in April, which moderated the April fall in loan commitments,” he said. 

    Much of the decline in home loan commitments was driven by sharp declines in Queensland, but was offset by a rise in Victoria for investor commitments. 

    Westpac economist Matthew Hassan said the figures were better than expected, but the coming month would see a far worse result.

    "Housing finance beat expectations, recording a material but milder than forecast 4.8% fall in value terms," Mr Hassan said.

    "The detail showed similar sized declines across owner occupier and investor segments.

    "Approvals are likely to record a steeper drop as virus impacts show through more fully in May."

    Prior to the release of the figures, NAB economist Tapas Strickland said a sharp decline in commitments was expected.

    "The data is for April and is unlikely to be market moving. Given the sharp fall in housing turnover, a sharp decline in approvals is expected," Mr Strickland said. 


    Disclaimers

    The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

    • The big four banks are: ANZ, CBA, NAB and Westpac
    • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
    • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
    • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

    Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

    In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

    *Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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    Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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