Home loan demand bounces back

Home loan demand rose in October, according to new data from the Australian Bureau of Statistics (ABS) following two months of decline.

December 11, 2018

Home loan demand rose in October, according to new data from the Australian Bureau of Statistics (ABS) following two months of decline.

The latest Housing Finance data from the ABS reveals that, in seasonally adjusted terms, 52,654, home loans were approved throughout October – an increase of 2.2% on the month prior.

The data reveals that $30 billion worth of dwelling commitments were made over October, an increase of 2.6% on the month prior, in seasonally adjusted terms. This included an increase of 3.5% in the value of owner-occupied housing commitments to $20.1 billion and a 0.6% increase in the value of investment loans to $9.8 billion.

“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. 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,” said Mortgage Choice Chief Executive Officer, Susan Mitchell.

“That being said, the ABS’ data revealed the first increase in the value of investment loans since February this year. The encouraging result may suggest that APRA’s lifting of the benchmark on investment lending is starting to have an effect on demand for investment loans.

“The recent decline in housing finance approvals may be attributed to the meticulous level of scrutiny lenders are applying to new home loan applications, which has increased the length of time it is taking for home loans to progress from application through to approval.

“While October’s data is encouraging, it remains to be seen whether demand for home loans will start to stabilise in the near-term.

“Looking ahead, a sustained decline in house prices should continue to support home loan demand into the New Year. In fact, the most recent Hedonic Home Value Index from CoreLogic revealed an annual fall of over 4%, led by annual falls of over 8% and over 5% in Sydney and Melbourne respectively.

“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.

“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,” concluded Ms Mitchell.

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