Home loan approvals fall slightly in February 2021, but remain high

author-avatar By on April 01, 2021
Home loan approvals fall slightly in February 2021, but remain high

New loan commitments for housing fell slightly in February 2021, but still remains close to record highs.

The latest Australian Bureau of Statistics (ABS) lending indicators data for February shows a 0.4% decline in new loan approvals, seasonally adjusted, to a total of $28.6 billion. 

This is the first fall recorded since May 2020, and recent surges in loan commitments ensured lending remains extremely high despite this setback. 

According to ABS head of finance and wealth Katherine Keenan, lending commitments still remain 55% higher compared to February 2020 for owner occupiers. 

"The fall in February was driven by reduced loan commitments for existing dwellings, although the value of these loan commitments remained 39.7% higher than in February 2020," Ms Keenan said. 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates 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
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
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.^

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

So while owner occupied lending fell 1.8% over the month, investment lending rose 4.5% to reach 31.6% higher than its level a year prior. 

Construction lending increased 4.4% for new dwellings as more than 10,000 were approved, which represents an enormous 147% and 165.6% yearly rise in the value and number of new constructions respectively. 

“The value of loan commitments for the construction of new dwellings rose 4.4%, continuing a period of record rises since July 2020. Although the HomeBuilder grant, introduced in June 2020, was reduced from 1 January 2021, it was made more widely available to borrowers in NSW and Victoria through increased price caps on new build contracts.

"The time taken to process home loans meant that construction loan applications made in late 2020, prior to these changes, also contributed to loan commitments reported in February.”

ABSfeb11Source: ABS

First home buyers fall too 

Loan approvals for first home buyers also fell for the first time since May 2020, having last month reached a 12-year peak. 

The number of owner occupier first home buyer loan commitments fell 3.3% to 16,117 in February 2021, but remain near those historically high levels, up 65.8% year on year.

First home buyers now account for 35.1% of all owner occupied lending commitments, down from 36.5% the previous month. 

More first home buyers appear to be investing first (aka rentvesting), as the number of these investors being approved rose 4% over the month. 


Dwelling approvals record a strong rise 

While lending approvals fell in February, yesterday's Dwelling Approvals data from the ABS told a different story. 

The number of dwellings approved rose 21.6% in February (seasonally adjusted), after falling 19.4% in January.

Private house approvals rose 15.1%, and Director of Construction Statistics at the ABS Bill Becker said this exceeded the previous record-high seen in December 2020. 

"Since the introduction of the Homebuilder grant in June 2020, private house approvals have risen by almost 70%, he said. 

Townhouse and apartment approvals surged 45.3% following a nine-year low in January. 

The value of total building approved increased 23.3%, in seasonally adjusted terms.

While the ABS attributes these increases to HomeBuilder, Westpac Senior Economist Matthew Hassan said its month to month impact is proving difficult to pinpoint. 

"Grants available under the scheme were reduced from $25k to $15k at the start of 2021, the move likely accounting for the 11.8% pull-back in detached house approvals in Jan. At the same time, however, some qualifying criteria, including time limits on commencement, were also relaxed, broadening eligibility," Mr Hassan said. 

"The whole scheme expires on Mar 31, although the deadline for submissions has been extended to Apr 14 (these must still relate to contracts signed prior to Mar 31).

"We can only surmise that the scheme was still generating substantial approval activity in Feb, and that any unwind and associated weakness is still to come.

"Exactly when it comes and how large it will be remains highly uncertain."

Overall, Mr Hassan said Australia's housing upswing continues to outstrip expectations "at every turn". 

"The Feb rebound is clearly surprising and locks in a stronger near term outlook for new building. However, we remain wary of unwinding pull-forward effects associated with the HomeBuilder scheme in the months ahead," he said. 


Photo via iMike Stettler on Unsplash

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.

*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.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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