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Home loan demand falls for fourth consecutive month

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Reporter 4 minute read

Home loan demand from both owner-occupiers and investors has dropped, with overall dwelling commitments falling for the fourth month in a row, new data from the Australian Bureau of Statistics has revealed.

According to new Housing Finance data from the Australian Bureau of Statics (ABS), in total, 53,017 home loans were approved in March, down by 2.2 per cent from February. 

Demand from owner-occupiers fell by 2 per cent ($405 million) over the same period, with investor loan demand experiencing the sharpest decline, falling by $1.07 billion (9 per cent) when seasonally adjusted, the largest monthly percentage drop since September 2015.

The overall value of housing approval also declined, dropping by 4.4 per cent to $31.9 billion, largely spurred by a 9 per cent drop in the value of investor loans ($10.9 billion), with the value of owner-occupied mortgages also falling, dropping by 1.9 per cent to $21 billion. 

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The new CEO of Mortgage Choice, Susan Mitchell, said that she wasn’t surprised by the results, citing CoreLogic data that revealed a 0.3 per cent drop in combined capital city home values, which partly attributed the drop to seasonal factors. 

However, Ms Mitchell noted the overall strength of home loan approvals when compared to historical data. 

“The decline in home loan approvals and the value of dwelling commitments isn’t a surprise as this correlates with what we’ve been seeing in the housing market at the moment,” the CEO said.

“While we have seen a slight drop, home loan approvals remain strong by historical standards.

“We are now heading into the cooler months, which is a typically quiet period for the housing market, but we expect demand to stay relatively strong.

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“Interest rates remain at historically low levels, so it is a good time for home buyers to achieve their goal of property ownership.”

Reflecting on the sharp decline in investor demand, RateCity money editor Sally Tindall claimed that investors have been deterred by the fall in home values.

“The falls in property prices in Sydney and Melbourne have investors spooked,” Ms Tindall said. 

“Nothing sends investment lending off a cliff quite like a drop in property prices.”

However, Ms Tindall claimed that the Australian Prudential Regulation Authority’s (APRA) removal of the 10 per cent cap on investor lending growth would reinvigorate investor activity.  

“If history is anything to go by, they won’t be out for long. APRA has lifted the cap on investor lending and we’ve already seen a marked drop in investor interest rates,” the money editor added. 

“Once the market smooths out, you can be sure investors will be back doing the Saturday real estate rounds.”

[Related: Bank scandals to impact mortgage lending: RBA]

Home loan demand falls for fourth consecutive month
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