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First-home buyers lead the way as new loan commitments rise

New loan commitments for housing have risen for the first time since early 2022, climbing 4.9 per cent in March, including a substantial 15.8 per cent increase in new owner-occupier first-home buyer loans.

But despite the increases, all types of housing loan commitments are still lower than they were a year ago.

According to the Australian Bureau of Statistics latest lending indicators, the overall value of new loan commitments for housing rose 4.9 per cent to $24 billion in March.

This includes a 5.5 per cent jump in new owner-occupier loan commitments to $16 billion, while new investor loan commitments rose 3.7 percent to $8 billion.

ABS Head of Finance Statistics Mish Tan said despite the increases, the numbers were still a long way off those in 2022.

“The value of new owner-occupier loan commitments in March remained 25 per cent lower compared to the same time last year, while new investor loan commitments were 29 per cent lower,” Dr Tan said.

The value of new owner-occupier housing loan refinances between lenders rose 3.9 per cent to another record high of $14.2 billion in March 2023. 

Borrowers continued to switch lenders for lower interest rates as the RBA’s cash rate rose.

Dr Tan said the number of new owner-occupier first-home buyer loan commitments rose 15.8 per cent in March (seasonally adjusted), after reaching a five-year low in February.

She said despite the monthly rise in owner-occupier first-home buyer lending, the number of these commitments was 22 per cent lower compared to a year ago.

“During the second half of 2020, first-home buyer lending reflected the strength in demand for housing during the pandemic, with new commitments peaking in January 2021 and declining by half since then,” Dr Tan said.

PropTrack Economist Angus Moore said the lending figures were a step in the right direction.

“The value of new mortgage commitments in March was up just under 5 per cent compared to February,” he said.

“That’s notable as it’s the first time we’ve seen an increase in new lending since early 2022.

“Even so, we’re seeing a lot less new lending than we were a year ago, down a bit over a quarter compared to March 2022. 

“While that’s a substantial pullback, it really reflects just how strong lending activity was in late 2021 and early 2022. 

“The value of new loan commitments is still pretty robust and is substantially stronger than we were seeing in 2019 or early 2020, in part because of the strong growth in house prices we’ve seen.”

Mr Moore said external refinancing activity remained strong and showed no signs of slowing down. 

“It hit another new peak in March, with around 28,000 owner occupiers refinancing in March alone – that’s twice as many as we’ve typically seen on average over the past two decades,” he said.

HIA Chief Economist Tim Reardon said lending for the purchase or construction of a new home remained at its lowest level in 15 years.

“The number of loans issued to purchase or construct a new home remained stable in March compared to the previous month, to be 30.7 per cent lower than at the same time last year,” Mr Reardon said.

“The last time so few loans were issued for the purchase or construction of a new home was in November 2008, when the GFC caused a contraction in building.”

Mr Reardon said In original terms, the total number of loans for the purchase of construction of new homes in March declined in almost all jurisdictions compared to the same month a year earlier, with the ACT leading the way (down 37.3 per cent), followed by NSW (down 36.3 per cent) and Tasmania (down 33.0 per cent).

Western Australia fell 30.6 per cent, followed by South Australia (down 29.7 per cent), Victoria (down 28 per cent), and Queensland (down 21.8 per cent). 

The Northern Territory saw the only increase, up by 26.1 per cent over the year.

“This data confirms that ongoing and significant declines in new home sales will see new home commencements slow significantly in the second half of 2023, under the weight of the higher cash rate,” Mr Reardon said.

“There are very long lags in this cycle and the full impact of the RBA’s rate increases are still to fully hit the housing market, let alone the broader economy.

“The weak lending figures observed by the ABS in March will not be apparent in other economic indicators until 2024, when the volume of homes under construction declines more markedly. 

“Given these long lags, the RBA shouldn’t be waiting to see unemployment rising before pausing the increase in the cash rate.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.