Housing finance rebounds in June after fall in May

author-avatar By on August 05, 2020
Housing finance rebounds in June after fall in May

Melbourne VIC, Australia. Photo by Gareth Harrison on Unsplash.

The value of new loan commitments for housing rose 6.2% in June, seasonally adjusted, after a sharp fall of 11.6% in May.

That's according to the latest Lending Indicators data from the Australian Bureau of Statistics (ABS), which shows the increase was largely driven by investment lending. 

New loan commitments for investors were up 8.1% month-to-month, or $4.4 billion, compared to owner-occupied housing which increased by 5.5% ($13 billion). 

On a yearly basis, owner-occupied housing is up by 8.7%, while investment housing commitments are down 6.1% (seasonally-adjusted). 

The number of owner occupier first home buyer loan commitments rose 3.3% on a monthly basis to 9,616 and is up an impressive 19.5% year-on-year, meaning first home buyers now account for 31.3% of all owner occupier commitments (excluding refinancing). 

ABS Chief Economist Bruce Hockman attributed the rise in housing loan commitments to the easing of COVID-19 restrictions in May around auctions, open houses and general personal mobility. 

“Despite the rebound in lending activity, the value of housing loan commitments in June was down over 10% compared to March after large falls in April and May,”
Mr Hockman said.

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.

Victoria sees fall - before COVID lockdowns struck 

June's housing recovery after May's historic falls was driven by pretty much every state except Victoria, which according to IFM Economist Alex Joiner, could underscore the likelihood of ongoing property market weakness in Melbourne. 

Each state bar-Victoria recorded either a large or modest increase in both investor and owner-occupier housing growth month-month, with the exception of Canberra: 

  • NSW posted a 9.5% and 13.7% growth in OO and investor housing respectively 
  • Queensland posted 19.5% and 15.1%
  • The ACT recorded 1.9% growth in OO housing but -5.8% in investment 
  • The Northern Territory posted a massive 45.7% growth in investment purchases and 19.4% in OO housing 

Victoria, on the other hand, saw a -5.8% decline in housing finance overall in June, with OO housing declining by 8.6% and investor housing recording a modest rise of 2.7%. 

However, these figures have happened before the worst of the state's COVID-19 outbreak occurred in July, and with new Stage 4 lockdowns coming into play in August, future results are likely to be even bleaker. 

[Read: One in ten home loans now deferred]

Commonwealth Bank Economists Kristina Clifton and Nicolas Guesnon said in an analysis of the results that while growth in June was strong, the reinstatement of stage 4 shutdowns in Victoria are likely to weigh on new home lending over coming months.  

"We do not see this month’s data as a turning point in home lending," they said. 

"Refinancing activity pulled back in June but still remains very strong. The uncertain economic backdrop seems to be prompting borrowers to find the best deal that they can on their home loans."

Buying an investment property or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for investors.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) investment 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. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.


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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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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