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‘Welcome lift’ in loan approvals bucks downward trend

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Reporter 4 minute read

The October rise in home loan approvals could “signal a reversal” in the market, but tighter credit conditions are likely to continue repressing demand, according to Mortgage Choice.

Reflecting on the latest housing finance data from the Australian Bureau of Statistics (ABS), Mortgage Choice CEO Susan Mitchell said that the 2.6 per cent jump in loan approvals in October is a “welcome lift” following consecutive months of decline.

The rise in overall housing approvals was driven by a 3.5 per cent increase in owner-occupied lending and 0.6 percent growth in investor lending, with the value of loan approvals settled in October totalling $30 billion.

Ms Mitchell observed: “In October, we saw a welcome lift in the number and value of home loans approved. The previous month’s data revealed the weakest value of dwelling commitments in four years.

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“While October’s unexpected results could signal a reversal in the recent softening in approvals, it is important to consider the volatility in monthly data comparisons.”

Ms Mitchell noted that the ABS reported the first increase in the value of investment loans since February, which she said was an encouraging result that may be attributed to the lifting of the prudential regulator’s cap on investor lending.

Further, the Mortgage Choice CEO attributed the longer-term decline in housing approvals to tighter credit conditions, which she said have “increased the length of time it is taking for home loans to progress from application through to approval”. 

Ms Mitchell said that the tightening of lending policy would continue to weigh on home loan demand but claimed that the continued fall in property prices could trigger demand from some segments of the market, with the share of loans from first home buyers (FHBs) increasing to 18 per cent in October.

Ms Mitchell said that the complexity of the home loan market presents mortgage brokers with an opportunity to further asset borrowers.

“Tighter credit policies and increased scrutiny of home loan applicants’ financial situation is likely to continue over the medium term, which is why I urge anyone looking to secure a home loan to seek professional advice.”

Ms Mitchell concluded: "A qualified mortgage broker will be able to guide first time buyers through the complex and often overwhelming home loan process, as they are in touch with the changing lending landscape and the policies and preferences of Australia’s lenders.”

[Related: Expenses to be one of 2019’s ‘biggest challenges’: ING]

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‘Welcome lift’ in loan approvals bucks downward trend
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