First home buyers, investors flooding the market but borrowing less

author-avatar By on November 02, 2020
First home buyers, investors flooding the market but borrowing less

Photo by Alexander Dummer on Unsplash

The latest Australian Bureau of Statistics' lending data shows more first home buyers and investors entered the market in September, but borrowed less.

The overall value of first home buyer loan commitments rose 12% in September, in original terms, but the average borrowed amount decreased down to $406,625, about a $1,300 decrease from August.

Investors also continued to steer the ship around, with the value of loan commitments in the sector increasing 5.24%.

However, investor loan size was down about 3% in September from $470,436 in seasonally adjusted terms in August. 

In total, new loan commitments rose 5.9% in September, excluding refinancing, with refinancing up 15%, in seasonally adjusted terms.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Has the HomeBuilder bear been poked?

Construction loan commitments in September were up 25.3% on the month, and up 73.8% on the year.

ABS head of finance and wealth Amanda Seneviratne said this could be partly due to HomeBuilder.

"Approximately half of the rise in September’s owner occupier housing loan commitments was for the construction of new dwellings," she said.

“Owner occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives. For example, it is likely that the HomeBuilder grant is contributing to increased demand for construction loans.”

The ABS also released dwelling approvals data today, with the number of dwellings approved having risen 15.4% over the month.

However this could be largely due to apartment construction, with 'private sector dwellings excluding houses' increasing 23.4%. 

Private sector houses increased 9.7% on the month.

ABS director of construction statistics Daniel Rossi also alluded to the success of HomeBuilder.

"The September results indicate continued demand for detached housing following the relaxation of COVID-19 restrictions in most states and territories. A range of Federal and state-based incentives are also providing support for the housing sector," he said.

However, Housing Industry Association chief economist Tim Reardon said HomeBuilder was more about building confidence in the market.

“These high volumes of sales, loans and approvals following the announcement of HomeBuilder will be relatively short lived. HomeBuilder was designed to provide consumers with confidence to return to the detached housing market. It has been very effective at achieving this goal," he said.

HomeBuilder is being used for new builds more than renovations, at a ratio of nearly 4-to-1, and the average value of private sector housing approved in September was $323,135 in original terms.

The latest dwelling approvals data was aided by Western Australia (+42.6%), which has its own state-based 'HomeBuilder' program, and a shorter pipeline of work than other states. 

The 'alterations and additions to residential building' category was also up just 1.1% in September, for an average value of $82,170 - below the $150,000 threshold required for the HomeBuilder grant.

Approximately only 15% of the number of alterations done in September would have been eligible for HomeBuilder.

Uptake of HomeBuilder was slow throughout its first four months, caught up in council approvals and slow state reaction times.

The government has budgeted approximately 27,000 HomeBuilder applications by the end of the year, and just over 11,000 applications have been received as of mid-October.

First home buyer sentiment lifts

A recent CUA survey of 1,500 Australians revealed more than half of those considering a property purchase are first home buyers.

Approximately 17% of first home buyers said government initiatives have enabled them to purchase a home sooner, or purchase a bigger property than they initially thought possible.

“The government initiatives in place are clearly helping many people overcome some of the roadblocks to achieving this dream, so it was very pleasing to see the recent extension of the First Home Loan Deposit scheme to help an additional 10,000 first home buyers secure newly constructed homes," CUA's chief customer officer Megan Keleher said.

However, approximately a third also said they are in a worse position now to buy a home, according to Ms Keleher.


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): Credit Union Australia, 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.

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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Harrison joined Savings in 2020. He is an experienced journalist, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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