Housing finance hits two-year high, investors remain wary

New home lending rose in August, but mostly to owner occupiers, as investors remain spooked by the economic challenges of the COVID-19 pandemic.

Data from the Australian Bureau of Statistics showed there were $21.3 billion in home loans settled in August, up 19.3 per cent from the year previous and the highest monthly mark since January 2018.

Owner occupiers accounted for $16.3 billion of the new housing commitments, with investors taking up $5 billion in loans over the month.

Government stimulus has also played its part in bringing first homebuyers into the market, with the number of loans for first time buyers rising to its highest point in more than a decade.

However, analysis by Canstar showed the total value of owner occupiers refinancing their loan facilities fell by 7.4 per cent in August, a third consecutive month of decline.

At the same time, the value of investor loans in August rose by 2.1 per cent, with investors refinancing a total of $4.12 billion in loans.

The $5 billion in loans to investors in August was down 4.6 per cent as compared to the same time last year.

Canstar finance expert Steve Mickenbecker said there were several factors holding investors back from taking the property plunge.

“Investment lending remains in the doldrums, with investors spooked by high vacancy rates and the prospect of low population growth and tourist and student visitors,” Mr Mickenbecker said.

“Investors have, however, been active with refinancing taking advantage of lower rate loans.”

Mr Mickenbecker said overall, the lending market had displayed the property sector’s resilience during the pandemic, but warned Melbourne’s lockdown could put the brakes on home loan growth in coming months.

“The Melbourne lockdown may still see a slowdown in lending in coming months given the lag-time between house purchase and loan settlement,” Mr Mickenbecker said.

“Refinancing is down from July with the third straight fall from the huge spike in May, but it is still in vogue being up 22 per cent on August last year. 

“With interest rates starting to drift below 2 per cent, refinancers are taking advantage of a massive savings opportunity.”

RateCity.com.au research director Sally Tindall said the data showed a clear rebound since the pandemic put the brakes on home sales in May.

“While this month’s data might be skewed by a backlog of home loans from the banks, over 200,000 new loans have settled since COVID hit – that’s a pretty decent number considering the turmoil we’ve been through.” Ms Tindall said.

 “First home buyers in particular have stormed back on to the property scene, with the highest number of new loans settled in more than 10 years.

 “That said, we expect the number of new home loans will fall next month as Victoria’s second lockdown flows through to the home lending market in Australia’s second largest state.”

Real Estate Institute of Australia president Adrian Kelly said the biggest increases in value of new loan commitments occurred in Victoria, Queensland and New South Wales. 

 “The recovery in lending is encouraging and reflects the earlier easing in restrictions on movements and subsequent market response but does not yet reflect the impact of second wave restrictions in Australia’s second-largest market of Melbourne,” Mr Kelly said.