Pullback in home lending as rate hikes take effect

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on June 03, 2022 Fact Checked
Pullback in home lending as rate hikes take effect

As interest rate rises take some heat out of the property market, loan commitments have also fallen.

ABS data released Friday shows the total value of owner occupier home lending was just under $20 billion in April, representing a 12.8% decline on the year, and 7.3% down on the month in seasonally adjusted terms.

For investors, total home lending reached just over $11 billion, representing a 37.1% increase compared to April 2021, and a 4.8% decline over the month.

ABS head of finance and wealth Katherine Keenan said these represented the largest monthly falls since May 2020 when Australia was in the throes of the first Covid lockdown.

"Lenders attributed the falls to a softening housing market, as well as the close proximity of Easter and ANZAC day public holidays, which softened borrower demand and limited loan processing more than would usually occur in the month of April," Ms Keenan said.

The average loan size rose 1.9% at the national level for owner occupiers, up from $600,000 to $611,000, but the ABS attributes that to a larger decline in the number of loan commitments relative to the value.

ANZ economists expect the declines in home lending to continue as inflation and interest rate rises affect borrowing capacity, with wages growth unable to keep pace.

National home values are already falling, led by declines in Sydney and Melbourne, with some pundits tipping 10-15% property price declines on average.

A recent CommBank survey shows most home owners are already taking steps to weather rate rises, while the prudential regulator chairman said home lending may no longer be "as safe as houses". 


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Lender

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Variable
More details
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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *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. Rates correct as of August 11, 2022. View disclaimer.


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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. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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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 strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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