FHB scheme sparks lending bounce in January

This makes January the second consecutive month to report an increase month-on-month in the number of first home buyers, after December saw a rise of 6.2 per cent (seasonally adjusted) from November.

Additionally, the Lending Indicators data shows that the number of FHBs who jumped on the property ladder in January is up 25.5 per cent when compared to January 2019.

The jump in FHB mortgage demand coincides with the launch of the government’s First Home Loan Deposit Scheme (FHLDS), which aims to get first home buyers into the property market sooner, requiring just a 5 per cent deposit.

According to the ABS data, the number of owner-occupier first home buyer loan commitments rose in January in all states and territories, except for Victoria and the ACT.

However, the number of loans commitments used by FHBs for investment purposes fell slightly, to 4.7 per cent (original terms) of all first home owners, compared to 5.4 per cent the previous month.

First home owner commitments accounted for 30.9 per cent of all owner occupier commitments (in original terms) in January, remaining largely consistent with previous months.

Notably, the value of first home buyer commitments has risen at a faster rate than the number of buyers, up 4.8 per cent in January. 

Louisa Sanghera, director and principal broker at Zippy Financial attributed the growth in both the amount of first home owners, and the value of loans taken by FHBs, to the launch of the FHLDS on 1 January.

“The number of first home buyers has been growing for the past year, but the past month saw enquiries to our office strengthen considerably,” Ms Sanghera said.

“Prospective property owners were aware they needed to move quickly if they were going to have any chance of securing one of the deposit scheme’s limited allocations from the start of the year.”

Ms Sanghera said that while the lending environment is now less restrictive than it once was, first home buyers still need to prepare themselves early to secure a loan.

“First home buyers, more than anyone, need professional advice to understand the ins and outs of the lending space,” she said.

“Long before they decide to buy property, first-time buyers should seek expert advice and instigate a number of budgeting and saving strategies to improve their borrowing capacity.”

A similar sentiment was shared by Aussie Home Loans CEO James Symond, who stated that lower interest rates, changes to serviceability requirements, and the introduction of the FHLDS have all made it easier for first home buyers.

“First home buyers now have even greater opportunity to break into the market,” Mr Symond said.

“While there are thousands of low rate home loan products available for first home buyers, ranging from basic loans to more sophisticated offerings, first home buyers need to be properly informed before committing themselves to a long-term financial commitment.”

Owner-occupiers driving total lending growth

Overall, the ABS data reported a 4.6 per cent increase (in seasonally adjusted terms) in the value of new housing loans approved in January, bringing the total to $20.7 billion for the month of January.

This growth was largely driven by a 5 per cent rise in owner-occupied loans, to $15 billion, with first home buyer owner-occupiers accounting for $4.19 billion of this figure.

Investor lending also increased in January, reporting a rise of 3.6 per cent month-on-month (seasonally adjusted), to $5.7 billion.

According to the Housing Industry Association chief economist Tim Reardon, the results represent the “strongest monthly increase in the cycle so far”.

“It also takes the value of lending to be worth some 28.2 per cent higher than the weak point in May last year,” Mr Reardon said.

According to Mr Reardon, the results report good news for Australia’s building sector, stating that overall improvements in the housing market seem to finally be “filtering through” to housing construction.

“Improvements in the overall housing market are filtering through to new home building conditions,” he said.

“The value of lending to owner-occupiers constructing a new home increased by 6.4 per cent in January to be 13.2 per cent higher than the trough, which occurred back in April last year.”

However, he also warned: “These results predate the effects of restrictions on trade and travel.”

“These effects represent significant uncertainties for the home building industry and will weigh on activity over the medium term,” concluded Mr Reardon.

[Related: Brokers lose out to branches in FHB scheme]