First home buyers pull back amid lower stimulus

author-avatar By on September 02, 2021
First home buyers pull back amid lower stimulus

The latest ABS data shows investors continued to borrow big, while there was a tapering off in lending to first home buyers.

The value of investment loans written in July was $9.35 billion, up 1.8% from the previous month. 

On the other hand, there was another dip in first home buyers entering the market, with a 6.8% fall in the number of first home buyer loans written, following a 7.8% fall the previous month.

The number of first home buyer commitments has fallen 20% since January, but remains 20% higher than a year ago. 

The value also fell from a tick over $7 billion to just over $6.5 billion in a month.

Loan commitments to first home buyers peaked in December 2020 for a value of nearly $7.6 billion.

ABS head of finance and wealth, Katherine Keenan, explained the reasons for the pullback in first home buyer lending.

"First home buyer lending fell across all states and territories, with the largest fall seen in Victoria, followed by Queensland and New South Wales," Ms Keenan said.

"While these falls were still tied to the unwinding of strength in construction lending post-HomeBuilder, the decline in first home buyer loan commitments now appears more widespread."

New record in refinancing 

The boom in refinancing is starting to filter through to ABS data, with the bureau reporting an all-time high in refinancing in July to $17.2 billion. 

This is 6% higher than a month ago.

"The value of refinancing between lenders was 60% higher in July 2021 compared to a year ago," Ms Keenan said.

"This reflected borrowers seeking out lower interest rates, particularly for fixed rate loans, and cashback deals across a large number of major and non-major lenders."

Fixed rate loans made up just 13% of new home loan lending in March 2020, compared to July 2021 where they now make up 47% of the value of the mortgage market. 

There has also been a flurry of lenders recently announcing cashback offers, sometimes to the tune of $5,000, partly enabled by the Reserve Bank's 'Term Funding Facility' providing $200 billion in virtually zero-cost funding to banks.

Nano Home Loans' CEO, Andrew Walker, said to be wary of cashback offers.

"Consumers need to be wary of pricing gimmicks such as cashback offers and honeymoon rates available in market as they hide the true cost of the loan for a consumer," Mr Walker said.

"To truly take advantage of the low interest rates in market, consumers need to look for comparison rates that match the advertised rate as that means there are no hidden fees."

CEO non-bank lender WLTH, Brodie Haupt, also warned home loan shoppers to be wary of cashback deals.


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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.


Photo by Josh Spires 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.

*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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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 is passionate about breaking down complex financial topics for the everyday consumer.

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