the adviser logo

Home loan volumes record pre-COVID slip

by Charbel Kadib11 minute read
Home loan

Both the value and number of new home loans declined ahead of the economic shock caused by the coronavirus outbreak, new ABS data has revealed.

The Australian Bureau of Statistics (ABS) has released it latest Lending Indicators data, reporting that the value of new home loan approvals dropped in February, sliding by 1.7 per cent in seasonally adjusted terms to $19.4 billion.

Both the value of owner-occupied and investor volumes dropped, falling by 1.7 per cent to $14.1 billion and 1.9 per cent to $5.3 billion, respectively.  

The ABS data revealed that the number of new owner-occupied loan commitments also slipped, down 2 per cent to 26,850.


According to an analysis of the data from BIS Oxford Economics, the decline in the number of owner-occupied loan approvals was driven by a 1 per cent fall in loans for established dwellings, with loans for the construction of dwellings increasing for the third consecutive month (2 per cent).

ABS chief economist Bruce Hockman noted that the February decline in home loan volumes follows “considerable growth” since mid-2019. 

However, the fall preceded the economic shock caused by the coronavirus outbreak, which analysts expect to weigh on demand for housing finance over the coming months.

Economist at BIS Oxford Maree Kilroy said she is expecting the economic hit from the coronavirus outbreak to be reflected in lending data over the coming months.

“The February result is too early to see the impact of the COVID-19 shock on the housing sector; however, it has begun to show through in forward leading indicators of housing demand such as auction clearance rates and confidence surveys,” she said.

“While construction is still deemed an essential sector, allowing the supply of new dwellings to continue albeit with disruptions, demand for new housing will be significantly weaker as the churn of dwellings seizes in June quarter and households put on hold stage of life decisions.”

Despite an overall decline in activity, first home buyer (FHB) volumes increased in February, with the number of owner-occupied FHB loans approved rising by 0.4 per cent, following a 0.5 per cent increase in January.

Ms Kilroy observed that the FHB uptick reflected ongoing demand for the First Home Loan Deposit Scheme (FHLDS).

“February is the first month in which we expected to see the effect of the First Home Buyer Deposit Scheme in action,” she added.

The National Housing Finance and Investment Commission (NHFIC) recently announced that pre-approvals granted to borrowers under the FHLDS would be extended in lieu of social distancing measures introduced to curb the spread of COVID-19.

Initially, the FHLDS required borrowers to find a property and enter a contract of sale within 90 days from the date they were first pre-approved under the scheme.

However, the NHFIC has now said that participating lenders would be given the ability to extend successful applicants’ places by a further 90 days, provided they were still eligible and satisfied the lender’s credit criteria.

The scheme was established by the federal government to enable FHBs to get onto the housing market faster by reducing the time required to save a 20 per cent deposit and eliminating the added expense of LMI for those with smaller deposits.

[Related: RBA leaves rates unchanged]

loan application  ta

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: [email protected]

Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more