Home lending drops for the first time in 8 months – is Australia’s home buying hysteria fatiguing?

After record-breaking levels of home lending since November 2020, the value of new loans dropped in June this year, according to latest data from the ABS.

While the one-month fall comes off the back of a record high, it signals Australia’s home buying hysteria could be starting to lose some momentum.

There were $32.05 billion of new home loan commitments in June, down 1.6 per cent month-on-month, the biggest monthly drop since May 2020, according to seasonally adjusted data from the ABS.

Source: ABS Lending Indicators June 2021, released 3 August 2021, excludes refinancing, seasonally adjusted data.

Worryingly, the value of owner-occupier first home buyer loans took one of the biggest hits, dropping by $532 million, or 7.8 per cent month-on-month in seasonally adjusted terms.

However, while the value of first home buyer loans has largely been dropping in 2021, compared to June last year when the country was in a recession, the value of loans is up by $2.42 billion, or 61.9 per cent.

By contrast, the value of investor loans rose 0.7 per cent month-on-month to $9.19 billion in June, the highest level in more than 6 years.

Value of new home loans approved in June

Source: ABS Lending Indicators June 2021, released 3 August 2021, excludes refinancing, seasonally adjusted data. Monthly change is May 2021 to June 2021, and annual change is June 2020 to June 2021.

RateCity.com.au research director, Sally Tindall, said: “While mortgage rates were still at near record lows, the meteoric rise in property prices could be starting to bite for some buyers.”

“Growth in home lending might finally be losing some steam as reality kicks in for buyers who can’t afford the eye-watering asking prices in Australia’s property hotspots,” she said.

“First home buyers are the key casualties in the property price boom, as many don’t have the means to keep up with investors and existing owner occupiers.”

Ms Tindall said we wouldn’t see the impact of the latest wave of lockdowns until the release of the August ABS data, as new home loans typically take six weeks to settle.

“It will be at least a couple of months before we see what impact the latest lockdowns have on the home lending market, however, there’s likely to be more twists and turns ahead.

“Would-be buyers who have taken a pay cut during this lockdown could be forced to put their plans on ice for now, while those who’ve kept their jobs and are saving more money working from home, might now be willing to pay top dollar to get into a bigger property,” she said.

Source: ABS Lending Indicators June 2021, released 3 August 2021, original data.

Compare home loans in Australia