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First time home loans surge to 7-year high

First time home loans surge to 7-year high

First time home loans have surged to a seven year high as latest figures show a major rise across all borrower segments post rate cuts.

Latest Australian Bureau of Statistics data out Monday showed a 5.1 per cent bounce in home lending, led by 5.3 per cent rise in owner occupiers, with first time buyers at their highest level in seven and a half years. Investor numbers were also up 4.7 per cent.

This after the Reserve Bank of Australia pushed out two 0.25 percentage point cuts in its cash rate targets in a row in June and July, which was followed by banking watchdog APRA relaxing its hold on mortgage serviceability requirements.

RateCity.com.au research director Sally Tindall said the stars were beginning to align for borrowers — a good sign in the lead up to Spring which is the biggest property selling season of the year.

“Borrowers are feeling buoyed by a combination of plummeting interest rates, tax cuts, more relaxed serviceability measures and clarity around negative gearing,” Ms Tindall said.

“Interestingly, this is the first month that factors in APRA’s axing of its 7 per cent serviceability floor. It’s likely that part of the bounce can be attributed to this, and we expect it to continue to have a positive effect on the market.”

The ABS data showed the proportion of first home buyers making up new owner-occupier numbers hit its highest level since January 2012, going to 29.4 per cent in July from 29.3 per cent in June.

Housing Industry Association economist Angela Lillicrap said first home buyers were taking advantage of “a less competitive environment and more affordable house prices”.

But she says the full positive effect of the two RBA interest rate cuts were yet to show in data.

“Given the lag between loan applications and final approval, it is unlikely that the full effects of the tax cuts and the two RBA rate cuts will be seen in the figures released (Monday). These changes should lead to more positive data as the year progresses”.

CoreLogic research analyst Cameron Kusher said demand for mortgages was starting to rise.

“In July 2019, there was $26.5 billion worth of housing finance commitments, marking the second consecutive month of increases,” he said. “The $26.5 billion was 5.2 per cent higher over the month, which was the largest monthly increase since March 2015.”

Around $19.3b worth of commitments was for owner-occupiers and $7.2b for investors, he said.


“For both owner-occupiers and investors it was the second successive months in which the value of lending has increased. The $19.3b worth of commitments to owner-occupiers was the greatest value since November 2018 and the $7.2b in commitments to investors was the greatest since December 2018.”

“Although it is now early in spring, auction clearance rates are continuing to rise as is the volume of stock available for sale and at the same time lenders are offering attractive mortgage rates for borrowers. Given all of this, we would expect that demand for mortgages will continue to climb over the coming months,” Mr Kusher said. Source: realestate.com.au