The latest figures from the Australian Bureau of Statistics (ABS) shows the value of new loan commitments for housing dropped off a cliff in May, down 11.6%, seasonally adjusted.
This was materially worse than market expectations of a 5.5% month-on-month fall, and follows a 4.8% fall in April.
ABS Chief Economist Bruce Hockman said this was the largest fall in the history of the series, driven by strong falls in the value of loan commitments for housing in New South Wales and Victoria.
While the value of new loans plunged, Mr Hockman said refinancing is booming.
“While reduced transactions in the housing market stifled new loan activity in May, the value of existing owner-occupier loans refinanced with a different bank was by far the highest on record as borrowers responded to reduced interest rates and refinancing offers”, Mr Hockman said.
Housing finance commitments for refinances have gone absolutely gang-busters over the past few months as people scramble for a better deal or look at ways to keep their homes pic.twitter.com/wyKQ1KeJuM
— Cameron Kusher (@cmkusher) July 9, 2020
The value of new loan commitments for owner-occupier housing fell 10.2% while investor housing fell 15.6%.
The number of owner-occupier first home buyer loan commitments meanwhile fell 9.3%.
Meanwhile, the value of new loan commitments for fixed-term personal finance rose 14.5% in May, seasonally adjusted, following a 24.8% fall in April.
“The rise in the value of new loan commitments for fixed-term personal finance was driven by a partial rebound in the value of new loan commitments for road vehicles”, Mr Hockman said.
Buying a home or looking to refinance? The table below features home loans with some of the lowest fixed interest rates on the market for owner-occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.54% p.a. | 5.58% p.a. | $2,852 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.49% p.a. | 5.40% p.a. | $2,836 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.64% p.a. | 5.89% p.a. | $2,883 | Principal & Interest | Variable | $250 | $250 | 60% |
| Promoted | Disclosure | ||||||||||
5.64% p.a. | 5.89% p.a. | $2,883 | Principal & Interest | Variable | $248 | $350 | 60% |
|
Westpac senior economist Matthew Hassan said the COVID shock has finally had its full impact on housing finance data.
"These figures are showing a lagged impact from the April lockdown rather than anything relating to the subsequent reopening... the ABS reported that COVID had an uneven impact on loan approvals in the month – contributing to sharp falls in housing loans but a notable rise in refi activity and fixed loans for personal finance," Mr Hassan said.
"Notably, the latter has much shorter lags between application and approval and recorded a sharper drop in April, hence the May gain may give some indication of how the reopening will translate to housing loans in the month ahead.
"That said, there is clearly a lot going on in the finance data which, given the lags involved as well, are not a particularly helpful guide to housing market conditions. With Melbourne entering lockdown, weekly auction results, price updates and homebuyer sentiment will instead be the main metrics to keep a close eye on."
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