First home buyers drive up new home loan commitments in January

author-avatar By on March 11, 2020
First home buyers drive up new home loan commitments in January

Photo by Matt Donders on Unsplash

The number of owner-occupied first home buyer loan commitments reached the highest point in ten years in January.

According to the Australian Bureau of Statistics (ABS), the number of loan commitments to owner occupier first home buyers rose 3.2% from December to January (seasonally adjusted).

Owner-occupied first home buyer loan commitments were up 25.6% on January 2019, while investor lending was up by 11.3%. 

In a sign that the market may no longer be driven by investors, first home buyers accounted for 20.2% of all lending in January, up from 17.5% a year prior, while investors accounted for 27.6% of all lending, down from 29.6% in January 2019.

The number of owner occupier first home buyer loan commitments rose in all states and territories outside of Victoria and the Australian Capital Territory. 

New loan commitments to owner occupier first home buyers, number, Australia

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Source: ABS

Zippy Financial Director and Principal Broker Louisa Sanghera said it was clear eligible first-time buyers had been making the most of the Federal Government’s First Home Loan Deposit Scheme in January.

“The number of first home buyers has been growing for the past year, but the past month saw enquiries to our office strengthen considerably,” Ms Sanghera said. 

“Prospective property owners were aware they needed to move quickly if they were going to have any chance of securing one of the deposit scheme’s limited allocations from the start of the year.”

Thinking about refinancing to a low-rate, variable owner-occupier home loan? The table below displays some of the lowest-rate variable home loans currently on the market for owner occupiers:

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

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 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. Rates correct as of September 28, 2021. View disclaimer.

Overall the value of new home loan commitments rose 4.6% for the month, seasonally adjusted. 

ABS Chief Economist Bruce Hockman said the result followed a 4.4% rise in commitments in December. 

“In January, the value of housing loan commitments grew at the fastest rate since the turning point in lending activity in mid-2019," Mr Hockman said.

"This growth continued to be driven by owner occupier housing, which rose 5.0% in January, the eighth consecutive month of uninterrupted growth.

“The value of new loan commitments for investor housing also strengthened in January, rising 3.6%.”

All states and territories outside of Queensland saw rises in owner occupier commitments. 

The number of owner occupier first home buyer loan commitments were up 25.6% on January 2019.

Fixed term home loan commitments rose 2.0% in January, following a 4.1% rise in January to be up 10.4% on the previous year.

In trend terms, the value of new loan commitments to businesses for construction fell 1.3% in January.

This was driven by weaker loan commitments for the construction of dwellings, with this series down 23.6% from the January 2018 peak.

Lower mortgage rates to provide boost to first home buyers 

After the Reserve Bank's (RBA) decision to cut the cash rate to a new record low 0.5%, CEO of mortgage broker Aussie James Symond said first home buyers should be cautious about diving into the market. 

“First home buyers now have even greater opportunity to break into the market," he said. 

"While there are thousands of low rate home loan products available for first home buyers, ranging from basic loans to more sophisticated offerings, first home buyers need to be properly informed before committing themselves to a long term financial commitment.”

Mr Symond shared his top 7 tips for first home buyers with Savings.com.au: 

  1. Work out how much you can afford to spend before you start, research price ranges in the suburbs where you want to purchase and ask an expert to help you
  2. Speak with an Aussie mortgage broker to help you decide what loan product suits your needs – especially your borrowing limit. When finding the best home loan for you, check out the ongoing payments, especially in the fine print for monthly service fees and other charges, and what they could become when rates inevitably rise
  3. If you are worried about potential rises in interest rate and repayments, you could split your loan between variable and fixed rates
  4. Remember a low start-up interest rate or honeymoon rate does not necessarily mean you will be paying less for your property in the long term
  5. Make sure you can still enjoy a great lifestyle after regular mortgage repayments.
  6. Get assistance and pre-approval for a loan, which Aussie can provide, so you know exactly what you can afford.
  7. Be aware you can get a loan under the Federal Government First Home Loan Deposit Scheme, allowing property purchases with a deposit of just 5 per cent. Another allocation of 10,000 loans in the scheme is expected to be made from 1 July 2020.


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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