Property investors drive home loan demand in lead up to Spring

New data from the Australian Bureau of Statistics has revealed that home loan demand continues to rise.

October 10, 2019

New data from the Australian Bureau of Statistics (ABS) has revealed that home loan demand continues to rise.

The latest data (5601.0) from the ABS reveals that, in seasonally adjusted terms, there was an increase in the number and value of home loans to owner-occupiers and an increase in the value of loans to investors over the month of August, following a rise in July.

According to the ABS, 49,792 home loans to owner-occupiers were approved throughout the month of August – an increase of 1.8% on the month prior.

Mortgage Choice Chief Executive Officer, Susan Mitchell said, “The continued growth in home loan demand is consistent with the turnaround we are seeing in the housing market of late, particularly in the nation’s two largest markets, Sydney and Melbourne.”

The ABS data showed an increase of 4% in the total value of home loans written to owner-occupiers on the month prior, to $20.5 billion. The value of home loans to owner-occupiers (excluding refinance) rose 1.9% in August.

Investors drove the surge in home loan demand over August, with the ABS data revealing an increase of 5.7% in the value of loans to investors (excluding refinance) over the month to over $4.8 billion.

Ms Mitchell said, “The growth in demand from investors is unsurprising when you consider the many factors which may be positively impacting investor appetite. The result of the Federal Election took the potential removal of property tax concessions off the table. As a result, once cautious investors may have been encouraged to put their buying plans in action.
“Policy and pricing on investment loans are now much more favourable. The gap between investment principle and interest and investment interest only home loan pricing was significant but it has narrowed in recent times, as lenders who no longer have to meet investment lending benchmark caps are now aggressively competing for customers.

“Interestingly, there was a drop of 0.7% in the number of loans to first home buyers over the month. There was also a drop of 0.8% in the value of loans to first home buyers.

“Generally speaking, investors and first time buyers tend to vie for similar property types. While one month of data does not indicate a trend, the August data may suggest that competition between these buyer segments could heat up in the Spring selling season.

“It remains to be seen whether the momentum in the housing market endures into the Spring selling season. Conditions have not been this favourable for all parts of the market in some time, with credit restrictions easing and home loan interest rates sitting at record lows following a third cut to the cash rate by the Reserve Bank.

“My advice to prospective buyers who are ready to buy in the coming months would be to speak to an experienced mortgage broker. While now is a great time to enter the market, it’s important to remember that the home loan process is still incredibly complex and if you plan to buy your first home or investment property, you should have a professional guiding you through the process. A Mortgage Choice broker will assess your unique financial situation and needs to find the right loan for you and when the time comes, they will do all the legwork for you to ensure you have the necessary documentation in order to submit your home loan application,” concluded Ms Mitchell.

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