Total loan approvals drop by over $1.6bn

Fixed lending commitments fell by 3.8 per cent while revolving credit commitments rose by 7.0 per cent. 

The value of total personal finance commitments also fell by 2.5 per cent in seasonally adjusted terms, from $6.319 billion in February to $6.160 billion in March. Revolving credit commitments dropped by 3.6 per cent and fixed lending commitments fell by 1.8 per cent. 

Further, the ABS data revealed a 1.8 per cent drop in lease finance approvals in seasonally adjusted terms, from $535 million to $526 million.

When including these figures with the statistics for investor and owner-occupier mortgages that were released in last week’s Housing Finance data, the total month-on-month drop in loan commitments was $1.6 billion.

Indeed, last week’s report showed that there had been the sharpest value decline in housing approvals since August 2016, with commitments dropping by 4.4 per cent to $31.9 billion.

This was 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 (or $405 million) to $21 billion.

Demand from investors experienced the sharpest decline, falling by $1.07 billion (9 per cent) when seasonally adjusted, the largest monthly percentage drop since September 2015. 

In total, 53,017 home loans were approved in March, down by 2.2 per cent from February. 

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.

“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: Home loan demand falls for fourth consecutive month]