New home loan values fall as interest rates rise

Rising interest rates are seeing home buyers less willing to borrow, while at the same time house hunters are seeing their borrowing capacity slashed.

The value of new home loans fell $1.41 billion to $30.97 billion in June, according to the Australian Bureau of Statistics.

Owner-occupier lending fell $707.4 million, which was a 3.3 per cent drop from the previous month, in seasonally adjusted terms.

Investor lending also dropped $707.0 million, down 6.3 per cent this month, however, is still up $1.54 billion, or 17.3 per cent, compared to a year ago. research director, Sally Tindall, said property buyers are currently sitting on the sidelines waiting for property prices to drop further.

“The value of new home loans will likely continue to fall as the property market cools,” Ms Tindall said.

“Many people who were looking to buy homes have put their house-hunting plans on hold and are waiting for prices to drop further before jumping in.”

The number of new owner-occupier first home buyer loans dropped also 8 per cent month-on-month in June.

In dollar terms, the fall in first home buyer lending was even bigger, down 10 per cent, reflecting property price falls.

Ms Tindall said while buyers might be sitting and waiting, rising interest rates are also reducing borrowing capacity for many house hunters.

“Seeing house prices drop may be a welcome relief for first home buyers who have been all but shut out of the market over the last year because of the surging property prices,” she said.

“However, first home buyers will also find the amount the bank is willing to lend them has also shrunk and will continue to fall as rates rise, which may again price them out of the market.”

The national average new loan size for owner-occupier dwellings has continued to slide, down 0.86 per cent ($5265).

Monthly drops were recorded in New South Wales, Victoria, Queensland and Tasmania, while all other states and territories rose.

Notably, the proportion of fixed loans funded in the month of June was just 9 per cent, in seasonally adjusted terms, and comes as banks rapidly hike fixed rates, for both new loans and refinancing.

At the peak in July 2021, 46 per cent of all new loans were fixed.

Ms Tindall said the majority of big banks’ fixed rates now start with a ‘5’ or even ‘6’ pushing borrowers back to variable loan products.

The value of new externally refinanced loans increased by $1.06 billion, to $18.16 billion in June, the highest value on record.

Ms Tindall said there has been a surge in borrowers refinancing their home loans, trying to find a better deal to combat the Reserve Bank rate hikes.

“While home loan rates have been rising, many banks are offering sharper rates for new customers, and big cashbacks for borrowers willing to refinance,” she said.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.