New investment and owner-occupied lending figures rise

The latest lending indicator data from the ABS found that the total value of new loan commitments for housing rose 5.4 per cent, up to $26.75 billion, in October and 4.9 per cent over the year.

The bureau revealed that the housing loan value for owner-occupiers grew 5.6 per cent to $17.23 billion, while investor loans grew 5 per cent to $9.52 billion.

Mortgage broker at Mortgage Express, Tracey Pye, agreed with the data and said November had continued the trend from the October data.

She told The Adviser: “I have found demands for new owner-occupied and investment loans have increased, with November being my highest month in submissions for 2023.”

Ms Pye added that while refinancing had “slowed due to reduced borrowing capacity”, she said “demands for first home buyers loans remain strong, with a lot still finding it difficult to get into the market and I feel that we will now be reaching a peak”.

“There are also a lot of curious investors coming back into the market,” she noted.

A continued slowdown in refinancing was also reported by the ABS, with the bureau finding that the number of refinanced owner-occupier loan commitments between lenders fell 12.4 per cent to 20,518, down from the record high of 28,150 in July 2023.

Suvidh Arora, founder of Cinch Loans, said while the October data largely reflected what the current market looked like, he cautioned that brokers were still entering a period that is “traditionally when activity slows down”.

“We are seeing that happen to a small extent,” he said.

He continued: “In the past few months, refinance numbers have dropped a bit due to a couple of factors – namely lenders becoming more aggressive in retaining existing clients, especially ones coming off fixed mortgages, and overall volume of fixed mortgage loans that expired seeing a downward trend between June and December this year.

“This is likely to peak again towards March/April 2024, when we see another rate cliff coming and the number of refinances likely to go up.”

He remarked that the increase in the value of loan commitments was likely due to “strong demand and limited supply in housing prices, which has increased the overall lending”, but added that the Reserve Bank of Australia’s high interest rates along with inflation have “kept these numbers in check as well”.

Senior economist at Westpac, Matthew Hassan, stated that while the “complexion” of the lending indicators data was expected, the 5.4 per cent rise in the total value of housing finance surprised the lender, being even higher than “Westpac’s top-of-the-range forecast of 3.2 per cent”.

Mr Hassan said: “Notably, refinance activity fell 7 per cent, bringing the 2021–23 boom to a decisive end – the boom saw loans worth over 10 per cent of the value of outstanding debt approved since mid-2022, much of the activity likely linked to fixed-rate mortgage roll-offs.”

Mish Tan, ABS head of finance statistics, commented that the October figures showed that “average loan sizes for first home buyers grew 0.3 per cent from $506,000 to $507,000, while average loan sizes across all owner-occupier loans grew 2.1 per cent from $553,000 to $564,000”.

Housing Industry Australia’s (HIA) chief economist Tim Reardon stated despite the rise in the lending indicators, “there is no justification for further rate increases”.

He added: “The RBA needs to pause any further rate increases and wait for the full impact of their actions to date to flow through to the wider economy.

“Not only are rising rates making it harder to address the acute shortage of housing stock, but the loss of skilled trades from the building industry will also make a recovery in home building increasingly slow.

“The industry requires stable and reliable economic settings to avoid an ongoing market roller-coaster.”

[Related: Rate cuts may trigger the next mortgage war, warns analyst]