First home buyers, investors flooding the market but borrowing less

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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.

Lender

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 10, 2022. View disclaimer.

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. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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