Homebuyers return to loan market despite ‘surprising’ rise in fixed rates

The overall increase was boosted by the 13th consecutive monthly gain in loans to investor borrowers, whose new loan commitments rose 3.8% to $10.1 billion – the highest monthly total on record. from the Australian Bureau of Statistics dating back almost 20 years.

Loans to homeowners jumped 7.6% and first-time homebuyer loans rose 3.7% from October.

Affordability remains a ‘key issue’

Average loan sizes hit new highs in all states and territories except Western Australia, which the Real Estate Institute of Australia said highlighted further affordability issues.

“The average loan size for owner-occupied housing – which includes construction and new and existing housing – reached a record high of $596,000,” said Hayden Groves, president of the Real Estate Institute of Australia.

“This indicates that housing affordability in some areas may still be a key issue facing Australians.”

CommSec senior economist Ryan Felsman said the “moderate” increase in lending to this segment showed they were struggling as a cohort.

“First-time home buyers are being squeezed out of the housing market,” he said.

Figures for November – in a month in which Sydney’s median house price rose $12,000 and Melbourne’s gained $5,835 – help in part to reverse a reduction in lending from mid-year stemming from lockdowns in Victoria and NSW, but they are doing little to dispel expectations of new regulatory curbs, said JPMorgan economist Tom Kennedy.

“Today’s print unwinds much of the recent weakness, although level-wise total loan values ​​are still 3% below the May pre-lockdown peak,” said Mr. Kennedy after the numbers.

“We continue to expect additional macroprudential measures to be implemented over time, which alongside our expectation for the RBA (Reserve Bank of Australia) to raise the cash rate later this year (au during the December 2022 quarter), suggests the monthly pace of home lending is likely to slow.

But restrictions on consumer behavior resulting from the omicron wave — whether formal lockdowns or a loss of trust between people themselves — could dampen activity and demand for credit, said economist Maree Kilroy of BIS Oxford Economics.

“The current surge in the omicron variant is expected to have a dampening effect on residential real estate transactions in the first quarter of 2022, with the high risk of infection seeing households behave more cautiously and limit movement,” Ms Kilroy said.

Omicron could “potentially” dampen activity to the extent that further macroprudential measures were needed, however, APRA was consulting on the matter in a process that would continue until the end of March and the omicron’s current wave may well have passed by then. , she said.

Priscilla C. Carnegie