New home lending plummets as rate rises bite

The value of new home loans being approved has plummeted by $2.26 billion in a month, according to ABS data released today.

In September $25.14 billion worth of home loans were approved, down 8.2 per cent from the month before in seasonally adjusted terms – the lowest value since November 2020.

Owner-occupier lending took the biggest hit, with a 9.3 per cent drop from the previous month, while investor lending fell by 6 per cent, compared to August.

Value of new home loans approved in September

Source: ABS Lending Indicators September 2022, released 2 Nov 2022, seasonally adjusted data. Annual change is Sept 2021 to Sept 2022. Excludes refinancing.

Source RateCity.com.au, ABS Lending Indicators September 2022, released 2 Nov 2022, seasonally adjusted data. Annual change is Sept 2021 to Sept 2022. Excludes refinancing.

RateCity.com.au research director, Sally Tindall, said: “Every month the RBA hikes the cash rate, the amount banks are willing to lend new borrowers shrinks.”

“This has the property market rattled, with both buyers and sellers exiting in droves,” she said.

“The hordes of cashed-up buyers are gone, while some nervous home-owners who were thinking about selling are now benching their plans,” she said.

First home buyers retreat in September

The number of owner-occupier first home buyer loans took a dive in September, dropping by 8.3 per cent, after seeing a 10.4 per cent gain the month before.

Owner-occupier first home buyers – September 2022

Source: ABS Lending Indicators September 2022, released 2 November 2022, seasonally adjusted data.

Sally Tindall said: “Although prices are dropping it’s still an uphill battle for first home buyers trying to enter the market.”

“The properties they’re inspecting might be getting cheaper, however, the entry price for many first home buyers is still out of reach, particularly now the cost of borrowing money is significantly higher,” she said.

“Last September, almost 12,000 first home buyers had their loans approved. This September, the number of first home buyers have plummeted by almost 30 per cent,” she said.

Borrowers continue to turn their back on fixing

The portion of fixed rate lending remains unchanged between August and September, at just 4 per cent of new and refinanced loans, in dollar terms.

At the peak in July 2021, when borrowers could still lock in rates under 2 per cent, 46 per cent of all new and refinanced loans were fixed.

Sally Tindall said: “It’s no surprise to see borrowers continue to snub fixed loans. These rates skyrocketed well before the RBA hikes began and show little sign of coming back down any time soon.”

“Twelve months ago, the big four banks were offering 2-year fixed rates as low as 1.99 per cent. Fast forward to today, and the lowest 2-year fixed from a big four bank is currently 5.49 per cent,” she said.

Source RateCity.com.au, ABS Lending Indicators September 2022, released 2 Nov 2022

Refinancing drops by $1.55 billion in a month

After hitting a record high in August, the value of refinancing dropped by $1.55 billion in September.

However, compared to September 2021, refinancing is up 7.4 per cent.

Total refinancing – September 2022

Source: ABS Lending Indicators September 2022, released 2 November 2022, seasonally adjusted data

Sally Tindall said: “Refinancing took a tumble this month, but it came off a record high in August.

“We expect the volume of borrowers looking to refinance to remain elevated in the months ahead as people move to combat rising rates.

“However, some of these would-be refinancers may find they’re in mortgage prison because they don’t have enough equity in their property or can’t meet a new lender’s serviceability test at higher rates,” she said.

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