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Low rates and high values drive home lending to all-time high

Record-low interest rates and record-high property values have helped drive home lending to an all-time high, according to newly released figures.

Yesterday’s Australian Bureau of Statistics lending indicators showed the total value of owner-occupier home loans settled in December was $19.94 billion, an increase of 38.9 per cent from 2019, seasonally adjusted.

The data coincides with the release of CoreLogic’s national home index figures, which also reached record levels in January. 

The ABS data showed overall lending to households also hit a new record high of $26.01 billion, up 31.2 per cent year-on-year.

The figures come as the Reserve Bank of Australia Board prepares to meet for the first time in 2021 today, after voting to leave the cash rate unchanged at a record low of 0.1 per cent in December.

RateCity.com.au research director Sally Tindall said the data from CoreLogic and ABS  showed record low rates, alongside targeted government incentives, were fuelling a boom in home lending, particularly among first-time buyers.

“While first-home buyers have continued their surge on to the property scene, investors are also starting to make a comeback, adding more competition in an already crowded market where in many locations, stock is in short supply,” she said.

Ms Tindall said proposed changes to stamp duty in NSW could also provide an extra boost to those entering the market for the first time, as it would enable potential buyers to redirect upfront stamp duty costs towards their deposit.

Although the figures showed more potential buyers were entering the market, Ms Tindall cautioned first-time buyers motivated by “fear of missing out” against borrowing more than they could afford.

She said the figures should also signal a warning to the Federal Government about its plans to roll back responsible lending laws.

“The last thing we want is for people to be pushed into loans they can’t afford to repay in a heated property market,” she said.

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