Sydney lockdown yet to hit lending; Home refinancing soars

The latest data from the government statistician reveals that while owner-occupier housing lending has passed its peak there has been a resurgence in investor lending. 

New South Wales lending is also still growing, with lockdown effects yet to hit the data. According to the Australian Bureau of Statistics. 

New housing loan commitments rose 0.2 percent for the month.  

Investor loan commitments rose 1.8 percent while owner-occupier loans fell 0.4 percent. 

First home buyer owner-occupier finance dropped by 7.6 percent reflecting the end of the HomeBuilder scheme. 

Home refinancing hit an all-time high in July as borrowers sought to take advantage of record low interest rates. 

First home buyer finance is continuing to decline from its peak in January and has fallen back from 25 percent of total finance in December to now 18.2 percent, said AMP Capital economist Shane Oliver. 

“While it led the charge higher in housing finance and the property market generally helped by various first home buyer incentives and ultra-low mortgage rates, first home buyer demand appears to have peaked as the HomeBuilder incentive has come to an end, demand was brought forward, and worsening affordability is starting to bite. 

“Meanwhile, investor finance is continuing to rise on the back of low rates and as the worst seems to be over in terms of inner-city unit rental falls in Sydney and Melbourne - although the current lockdowns may disrupt this - and as investors respond to the surge in prices and assume that it will continue.” 

Stronger house prices 

Oliver said the resurgence in investor financing over the last year and continuing strength in demand from owner-occupiers who are trading up point to further near-term strength in home prices. 

The AMP Capital economist said the rise in investor financing also points to a further acceleration in housing debt, a further rise in the share of interest-only loans and increasing lending at high loan to valuation ratios.  

All of which he argued will maintain pressure on the central bank and APRA to move to tighten lending standards to head off increasing risks of financial instability - albeit they are likely to wait for the dust to settle from the latest lockdowns before moving. 

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