New loan values in February fell 1.7% pre-coronavirus

Photo by Mitchell Luo on Unsplash

New loan values in February 2020 were down 1.7% in seasonally adjusted terms compared to January, according to data released today.

That's according to the Australian Bureau of Statistics (ABS) Lending Indicators data for February 2020, which also found new loan commitments rose 0.4% and 0.5% for owner-occupiers and investors respectively, implying borrowers are borrowing less.

This also represents a 1.7% and 1.9% respective drop in new loan commitments in seasonally-adjusted terms on February 2019, according to ABS chief economist Bruce Hockman.

“February’s fall in the value of new loan commitments for housing follows considerable growth in the series from mid-2019 onwards," he said.

The ABS release also noted there was "no notable impact" from the COVID-19 virus on new lending commitments in February - before travel restrictions and restrictions on auctions and inspections took place.

The total value of new loan commitments in February for owner-occupiers was $14.15 billion, and $5.30 billion for investors in seasonally-adjusted terms.

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.

Coronavirus won't impact data until March

Westpac senior economist Matthew Hassan said the results were softer than expected, but to expect steeper drops in March's data.

"The detail was soft across most segments and is despite both price gains and turnover still holding up reasonably well in the month," he said.

"While the starting point is a touch softer the main story is still of a likely severe decline as coronavirus effects impact in coming months."

However, Mr Hassan did point to a positive in the data - an uptick in construction loans.

"Construction-related loans bucked the wider monthly decline, posting a 1.9% rise, likely supported at the margin but post-bushfire rebuilding activity," he said.

Housing Industry Australia economist Angela Lillicrap highlighted first home buyer activity was strong and that investor lending is showing signs of improvement.

“First home buyers remained active in the market, with the largest number of loans issued to first home buyers during the month in over a decade," she said.

“Investor lending was also improving, up by 3.4% in the quarter to be 6.3% higher than the same time last year."

The news comes after experts predicted 20% to 30% price drops by the end of the year.

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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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