2020 closed with new record mortgage activity

This marked the largest monthly commitments on record, and was up 31.2 per cent from December 2019.

The commitments were driven by an 8.7 per cent increase in the value of new owner-occupier home loan commitments to $19.9 billion in December 2020, itself a new record-breaking figure.

Indeed, owner-occupier commitments were up 38.9 per cent from December 2019.

The first home buyer (FHB) segment contributed to owner-occupier rise, with the number of FHB loans increasing by 9.3 per cent (seasonally adjusted) to 15,205, up 56.6 per cent since December 2019.

According to the ABS, this is the highest level since June 2009, when there was similar rapid growth as a result of the temporary tripling of the First Home Owner Grant as part of the federal government’s economic support package in response to the global financial crisis.

Commenting on the figures, ABS head of finance and wealth Amanda Seneviratne said that federal and state government measures such as the HomeBuilder grant as well as record-low interest rates are supporting ongoing growth in housing loan commitments.

“Loan commitments for existing dwellings accounted for 53 per cent of December’s rise in owner-occupier housing loan commitments, while construction of new dwellings accounted for 32 per cent,” she said.

“The value of construction loan commitments grew 17.1 per cent in December, more than doubling since the June implementation of the HomeBuilder grant.”

Loan commitments have been on an upward trajectory since the latter part of 2020, with loan approvals surpassing $24 billion in November 2020 (the previous record), while the value of new owner-occupier home loan commitments rose 5.5 per cent on October figures to $18.3 billion.

In October 2020, the total value of new loan commitments rose 0.2 per cent to $22.7 billion in seasonally adjusted terms, which marked a 31.2 per cent increase from 2019. The value of new owner-occupier home loan commitments rose 0.8 per cent to $17.4 billion in October, which was more than 30 per cent higher than October 2019.

The changing fate of 2020 lending

However, lending figures did not look as promising in the beginning of 2020, even before the onset of COVID-19.

In fact, ABS Lending Indicators data for February 2020 had shown that new home loan approvals had declined by 1.7 per cent in seasonally adjusted terms, while the value of owner-occupier and investor volumes dropped, falling by 1.7 per cent to $14.1 billion and 1.9 per cent to $5.3 billion, respectively.

Economists had noted that the February 2020 decline had followed “considerable growth” since mid-2019.

In April, the value of home loan approvals dropped 4.8 per cent to $18.5 billion (seasonally adjusted terms), marking the sharpest decline since May 2015. This was attributed to a lag in lender turnaround times off the back of a deluge of mortgage enquiries in March 2020.

“COVID-19 operational impacts experienced by some lending institutions resulted in a backlog of March housing loan applications being processed in April, which moderated the April fall in loan commitments,” ABS chief economist Bruce Hockman had said at the time.

It was only in the May 2020 Lending Indicators data that the full impact of the COVID-19 crisis was evident, with home loan approvals plummeting 11.6 per cent (seasonally adjusted terms) to $16.4 billion, marking the largest fall in the history of the series.

A deflated housing market and the slump in home loan approvals – which was exacerbated by the COVID-19 crisis – led the federal government to introduce the HomeBuilder package in June 2020.

The package, which was initially available to owner-occupiers “substantially renovating” or building a new home from 4 June to 31 December 2020, was extended in November 2020 until 31 March 2021, albeit in an altered form.

The release of the program – which coincided with the easing of social distancing measures and restrictions – led to a bump in sentiment and an 8.9 per cent increase (seasonally adjusted) in the total value of housing finance commitments over the month of July. This was driven by a 10.7 per cent surge in the value of owner-occupied mortgage approvals, which at the time was the largest monthly improvement on record.

Since then, data from the ABS has shown that mortgage approvals have been on an upward trajectory, consistently recording double-digit monthly increases, driven by owner-occupier loan commitments, which have also been at record-high levels.

[Related: ACT scales housing scorecard after six years]