New home loans suffer largest drop on record

The number of new loans meanwhile fell 15 per cent to 111,878, leaving commitments 21.4 per cent below their level a year earlier.

Investor lending falls accelerate across the country

Investors took out 35,301 new loans during the quarter, a 30.6 per cent reduction, while the value of those commitments dropped 32.3 per cent to $24.705 billion.

Both measures registered their third successive quarterly decline and their largest quarterly falls on record.

The ABS said the declines had accelerated to almost twice the previous record, with substantial falls across every state and territory.

Investor loan numbers were 38.5 per cent lower than a year earlier, underscoring how sharply activity has reversed.

ABS head of finance statistics Dr Mish Tan said the scale of the investor pullback suggested borrowing costs were not the only influence on purchasing decisions.

“While lending activity fell across all borrower types in the September quarter, the decline was sharpest for investors. Our data suggests that investor activity is being influenced by factors beyond increasing borrowing costs, including the potential impacts of tax changes and expectations of lower house prices,” Tan said.

The assessment follows comments earlier this month from Reserve Bank of Australia (RBA) governor Michele Bullock, who linked the greater investor decline compared with previous rate-rising cycles to changes announced in May’s federal budget.

Borrowers have also faced successive monetary policy increases, with the RBA lifting the cash rate for the fifth time this year at its November meeting, taking it to 4.85 per cent, an 18-year high.

First home buyers gain share despite fewer loans

Owner-occupier lending declined less sharply than investor borrowing, but still weakened across both quarterly and annual comparisons.

The number of new owner-occupier loans fell 5.3 per cent, following a 4 per cent reduction in the June quarter, and was 9.8 per cent below a year earlier.

Queensland, Victoria and New South Wales drove the quarterly decline, recording falls of 10.4 per cent, 6.6 per cent and 4.1 per cent, respectively.

First home buyer (FHB) loan numbers dropped 8.6 per cent, following a 4.4 per cent June-quarter fall, to sit 12.3 per cent lower annually.

Despite that contraction, the ABS highlighted the continuing importance of FHBs within owner-occupier activity.

“Owner occupier first home buyers continued to account for more than one-third of owner occupier commitments, remaining a significant share of owner occupier lending,” the ABS said.

Speaking before the ABS release, Housing Minister Clare O’Neil attributed weaker transaction volumes to a softening property market.

“Because house prices are softening around the country, volumes are generally down, there are fewer transactions taking place, and that explains the numbers,” O’Neil said.

The minister argued that the changing distribution of lending, rather than the overall decline alone, provided evidence of improving conditions for aspiring owner-occupiers.

“The share of lending that’s happening in the market is increasing when it comes to first home buyers and owner occupiers, and it is decreasing when it comes to investors,” she outlined.

O’Neil also pointed to first home buyers’ success against competing bidders as an encouraging indication, while acknowledging that further progress was needed.

“What we’re seeing is that more first home buyers are winning auctions that they’re competing in, and so these are really good early indicators. We’ve got a long way to go here, but we’ve got some important pieces of progress being made,” she said.

“We have as a government a pretty unapologetic focus in getting more Australians into home ownership. And the data that’s been released since the budget actually shows us that we are having real success on that.”

Refinancing and applications also lose momentum

The weakness extended to refinancing, with external owner-occupier refinance numbers falling 3.8 per cent over the quarter to 63,475, down 5.9 per cent annually.

Internal owner-occupier refinances declined 4.1 per cent to 41,905 and were 9 per cent below a year earlier.

Investor refinancing figures showed that the internal category fell 8.9 per cent to 13,936 while external refinances dropped 6 per cent to 34,143.

Separate Equifax figures had already indicated weakening demand, with mortgage demand falling 19.2 per cent annually in September.

It was the sixth consecutive monthly decline, reversing August’s improvement to a 14.1 per cent annual fall, with the figures also showing refinancing weakening across both lender channels.

CBA’s first-quarter trading update on Wednesday provided another indication of the slowdown, with home loan applications across CBA and Bankwest down 16 per cent annually in the September quarter.

All four major banks have reported slower home loan growth.

Construction finance bucks the broader lending decline

Outside housing, personal finance commitments fell 3.9 per cent over the quarter to $9.3 billion, leaving their value 0.8 per cent below a year earlier.

Vehicle finance moved against that trend, increasing 1.8 per cent to $4.8 billion, while other personal finance contracted 8.7 per cent to $4.5 billion.

Business lending produced a more mixed result.

Construction finance climbed 27.6 per cent to $17.2 billion, putting it 51.8 per cent above its year-earlier level.

Finance for business property purchases declined 6.4 per cent to $25.4 billion, although it remained 1.5 per cent higher annually.

[Related: Mortgage growth flatlines at Australia’s biggest banks]