Home loans rebound, largest monthly rise on record: ABS

The home loan market is showing signs of a recovery following the COVID-19 volatility with a surge in new commitments, figures from the nation’s statistical body reveals.

About $19 billion was spent on new home loan commitments in the month of July, the Australian Bureau of Statistics (ABS) revealed, a nearly 9 per cent increase that is the largest in the statistical body’s data series.

The surge in home loan commitments excluded people refinancing existing mortgages and was bolstered by the strong presentation of first home buyers.

The increase was off the back of easing COVID-19 restrictions, including open houses and auctions, Amanda Seneviratne said, head of finance and wealth at the ABS.

“July owner occupier home loan commitments rebounded with the largest month-on-month rise in the history of the series, as social distancing restrictions eased in most states and territories," she said.

“New loan commitments for owner occupier housing rose in all states and territories, except the Australian Capital Territory. 

“The largest increases were in New South Wales, Victoria and Queensland.”

The combined values of home loan applications in July of $18.92 billion still represented a drop prior to the COVID-19 pandemic. At the beginning of the year in January, for instance, home loan commitments were valued at $20.73 billion.

But the rebounding figure offered some insight into people’s appetite for buying a property following the easing of coronavirus restrictions.

Plenty of first home buyers

Most of the new loan commitments were made by people who wanted to live in them. 

Owner occupiers represented a rise of 10.7 per cent to $14.33 billion, while investor housing increased by 3.5 per cent to $4.58 billion, the ABS said.

First home buyers accounted for 32.5 per cent of all owner occupier commitments, a rise of 14.4 per cent.

The timing coincides with the first home loan deposit scheme’s release of 10,000 placements for the new financial year. However, it is unclear how this influenced the 11,018 commitments made by first home buyers in July.

The scheme allows people to buy their first property with a mortgage deposit as little as 5 per cent without needing them to save for lenders mortgage insurance. This is because the government guarantees the remaining deposit shortfall.

The first report assessing the scheme’s performance found it helped buyers enter the property market four years quicker on average.

Victoria’s second lockdown could affect the recovery

All states other than the ACT showed a rebound in home loan commitments, but the ABS anticipates Victoria’s will face complications as a result of its second lockdown.

“The value of new loan commitments for owner occupier housing in Victoria rose 8.9 per cent in July,” Ms Seneviratne said. 

“(This reflected) the period of eased COVID-19-related restrictions prior to restrictions tightening again from later in July."

Melbourne recently became the capital city with the highest proportion of property vacancies in Australia after dethroning Sydney, according to Domain Group, a confluence of stage four restrictions with a decrease in international students and visiting migrants.

The Reserve Bank estimates the second outbreak will lead to a fall in the state’s GDP growth of 2 per cent during the second quarter, impacting the national economic recovery. 

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