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Home Loan Trends Show the Rise of Owner Occupiers, First Home Buyers

Home Loan Trends

The volume of finance secured for the purchase of property experienced a strong rebound in the September quarter, following the initial shock to demand the trends in a home loan in the first two months of the June quarter.

The latest ABS housing finance data shows the volume of finance lent for the purchase of property increased 5.9 percent in the month of September, taking the quarterly increase to 20 percent, the highest quarterly growth rate on record.

It follows a 10.9 percent contraction in housing finance through the June quarter, when strict social distancing restrictions, such as a ban on open home inspections and on-site auctions, resulted in a sharp drop in transactions.

Rolling quarterly growth in housing finance

home loan trends

Housing finance for the purchase of property totaled $62.7 billion in the September quarter.

This is the highest level since the March 2018 quarter and is just 6.6 percent below the peak of the lending series in the three months to May 2017.

The uptick is a result of eased social distancing restrictions across the country, which have coincided with historically accommodative monetary policy, which sees mortgage rates at a record low.

As with the strong bounce-back in many economic indicators over the September quarter, eased social distancing led to a rise in consumer sentiment and an increase in sales and listings volumes.

Corelogic estimates that sales volumes increased around 27.7 percent in the quarter, despite renewed restrictions across Victoria.

The CoreLogic Residential Mortgage index (RMI) indicates further increases in housing finance over October and November.

The RMI tracks changes in valuation activity across CoreLogic platforms for the purpose of dwelling purchases.

In the 28 days ending 8th of November, the Corelogic RMI rose 26.9 percent.

As can be seen in the chart below, the RMI is a leading indicator of monthly ABS housing finance commitments in the owner-occupier segment.

Queensland leads growth in housing finance

Of the states and territories, Queensland accounted for most of the increase in lending for the purchase of property.

The value of housing finance commitments (excluding refinancing) increased 40.2 percent in Queensland over the September quarter, accounting for around 31 percent of the uplift in finance nationally.

This was followed by NSW, which contributed 30% to the uplift nationally, as the state saw a 16.7 percent increase.

Western Australia had the largest increase in housing finance for the purchase of property over the September quarter, rising over 55 percent.

This further supports the view that the WA and Perth dwelling markets are resuming an upswing following the disruption of Covid-19.

Despite extended restrictions on the transaction of property across Victoria for much of the quarter, the state still saw a 4 percent uplift in the value of finance for the purchase of property, which was entirely fuelled by owner-occupier purchases.

Finance secured for the purpose of investment property purchase fell -4.3 percent across the state in September.

ABS data suggests external refinancing came down 9.6 percent over the quarter, after an unprecedented peak in May. However, the value of external refinancing is still elevated and is 30.4% higher than in the September quarter of 2019.

As the RBA handed down a further reduction in bank funding costs over November, and mortgage rates continued to fall, refinancing should remain elevated.

But it is worth noting the vast majority of discounted funding costs for banks are being passed through to fixed-rate loan products.

The exit fees that can be associated with fixed-rate home loan arrangements may constrain refinance activity down the line, once a portion of the current wave of borrowers are locked into fixed-rate arrangements.

In the near term, CoreLogic estimates lending for the purchase of a property will continue to remain elevated due to loose monetary policy.

However, the steep increases in finance seen in recent months are unlikely to maintain such a strong trajectory, and quarterly growth rates in housing finance volumes are likely to slow as pent-up demand runs out of steam.

Owner-occupiers continue to dominate lending

Investor participation in the housing market has been trending down since a national property market downturn in 2017.

The= retreat of investors and the rise of FHBs has only been exacerbated by Covid-19, as a risk in investor-grade stock became elevated, and government stimulus targeted the construction of new homes and grants for FHBs.

FHB purchases may be limited late next year, as temporary grants and concessions wind down, and house prices rise off the back of low mortgage rate settings.

In contrast, we could see a lift in investor participation as prospects for capital gains solidify, providing a further incentive for investors, along with more properties returning a positive cash flow thanks to such extremely low-interest rates.

 

The post “Home Loan Trends Show the Rise of Owner Occupiers, First Home Buyers” by Eliza Owen appeared first on the theurbandeveloper.com Blog

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Finance

Investors Lead Home Loan Rush

Home Loan

Property investor lending in January has risen by 10.5 per cent, lifting the overall value of home loans to $28.7 billion in the month—an increase of 43 per cent on 2020.

The surge in the latest Australian Bureau of Statistics figures occurred across all states and territories, with the exception of the Northern Territory, to be 44.3 per cent higher year on year, the largest annual growth on record since 2003.

Owner-occupier lending for homes rose 10.9 per cent in January, 52.3 per cent higher than in January 2020, with first home buyers increasing by 9.6 per cent to be at the highest level since May 2009, mirroring the similar uptake following the global financial crisis and the introduction of the first home-owner grant.

Investor lending for housing lifted by 9.4 per cent, capping a 22.7 per cent rise across the last twelve months and revealing a renewed appetite in new loan applications.

The lift marks the the largest rise in new loan commitments for investor housing since September 2016.

The number of first home buyer loan commitments for investment purposes accounted for 4.4 per cent of all first home buyer commitments.

The HomeBuilder program, which offers grants of $25,000 to help construct or renovate a property, is also contributing to an increasingly febrile market.

 Home Loan

▲ The value of loans for alterations and additions in the three month to January 2021 is 40.8 per cent higher than the same time the previous year.

“Since the HomeBuilder grant was introduced in June 2020, there have been record rises in the value of construction loan commitments,” ABS head of finance Katherine Keenan said.

“Loan applications made late in 2020—prior to the reduction of the HomeBuilder grant on 1 January 2021—contributed to the strong rise in January’s construction loan commitments of 15.7 per cent.”

The value of new loan commitments to owner occupiers rose 10.9 per cent, the largest monthly increase since August 2020.

Owner-occupier first home buyer loan commitments accounted for 36.5 per cent of all owner occupier commitments.

Despite 6.5 million Victorians being put through two lockdowns in the lead up to January, the value of new loan commitments to investors also rose 12.9 per cent in the state across the month.

ANZ economist Adelaide Timbrell said Victoria has continued to play catch-up after its lockdown, with its total new lending moving from 15.2 per cent year on year in December to 29.7 per cent year on year in January.

“Government support is adding to the momentum of housing lending, with stamp duty concessions in Victoria, the first home owner deposit scheme and other first home owner concessions all reducing the initial cost of home purchases.

“Low rates—including an outlook of continued low borrowing costs—are fuelling the housing market more than other parts of the economy,” Timbrell said.

Loans to owner-occupiers for the construction of a new dwelling in the three months to January 2021 compared to the same time last year has tripled in Western Australia, up 221.7 per cent and more than doubled in Queensland to 164.9 per cent.

The Northern Territory recorded a 160.3 per cent boost while Tasmania and Victoria also recorded spikes of around 100 per cent.

HIA economist Angela Lillicrap said investors were now returning but remained more active in the market for established dwellings.

“The value of lending to investors increased by 17.6 per cent in the three months to January 2021 from the previous quarter.

“Low interest rates, rising house prices, higher savings and a demographic shift in demand towards detached housing and regional areas should ensure ongoing demand,” Lillicrap said.

National house prices grew slightly by 0.9 per cent in January to surpassed pre-Covid levels by 1 per cent, and be 0.7 per cent higher than the previous September 2017 peak.

 

Article Source: theurbandeveloper.com

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Finance

2020 saw 6,777 interest rate cuts across Australia’s home loan institutions

From 1 January to 31 December there were 6,777 cuts to home loans, with an average cut of -0.30%, according to Canstar’s database.

It recorded:

  • 880 cuts to variable rates for owner occupiers, with an average cut of -0.21%
  • 2,455 cuts to fixed rates for owner occupiers, with an average cut of -0.33%
  • 764 cuts to variable rates for investors, with an average cut of -0.21%
  • 2,678 cuts to fixed rates for investors, with an average cut of -0.32%

Over the same period there were 535 home loan rate increases, with an average increase of 0.20%.

On 1st January 2020 the average variable rate for owner occupiers paying principal and interest was 3.73% (80% LVR). Today that rate is 3.32% The lowest variable rate was 2.69% and it is now 1.99% (80% LVR) or 1.77% (60% LVR).

On the 1st January 2020 the average 3-year fixed rate for owner occupiers paying principal and interest was 3.15%. Today the average 3-year fixed rate is 2.30%. The lowest 3-year fixed rate was 2.69% and it is now 1.89%.

Australia's home loan institutions

Savings interest rates

From 1 January to 31 December Canstar recorded:

  • 529 cuts to savings, with an average cut of -0.18%
  • 262 cuts to regular savings accounts, with an average cut of -0.19%
  • 267 cuts to bonus savings accounts, with an average cut of -0.17%

On 1st January 2020 the average regular savings account rate was 1.12%. Today that rate is 0.43%. The maximum rate was 2.65% and it is now 1.75% (available for 4-months).

On 1st January 2020 the average bonus savings account rate was 1.47%, now just 0.75%. The maximum rate was 2.25% and it is now 1.35%.

 

Article Source: www.urban.com.au

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Finance

Home-buyer confidence at an all-time high

Home-buyers

More than two-thirds of respondents in a recent survey believe that the conditions are right to purchase a home – a level of confidence not seen since the onset of the pandemic.

Finder’s latest consumer sentiment survey, which involved a nationally representative sample of more than 20,300 respondents, found that 67% of Australians feel that now is a suitable time get on the property ladder, up from 42% last April.

This marked the first time that home-buying optimism has reached this level since the financial comparison site started tracking the metric in May 2019.

Confidence was highest in Adelaide, where 77% of those polled thought now is the right time to buy a home. This was followed by Melbourne’s 70%, Brisbane’s 69%, Perth’s 67%, and Sydney’s 59%. Numbers were not available for Canberra, Darwin, and Hobart.

Those expecting house prices in their areas to “significantly increase” also hit an all-time high of 19%, climbing from just 5% in September last year.

Meanwhile, respondents who anticipate property values to “somewhat increase” rose to 44% from a low of 18% back in April.

Graham Cooke, insights manager at Finder, said that the recent spike home-buyer optimism was a good indication of economic recovery.

“This rebound in buyer confidence is indicative of increased economic activity over the past few months, along with an optimistic outlook for 2021,” he said. “Not only did the Australian government do a better job than most at restricting the spread of COVID-19, but federal and state economic support measures helped prop up the property market.”

Cooke said that property prices in every capital city, expect for Melbourne, have reached a higher level compared to the same time last year, adding that he expected “this trajectory to continue,” especially with 86% of economists in a separate Finders survey predicting a full recovery of national house values this year.

However, Cooke advised prospective buyers to carefully consider the pros and cons “before taking the plunge in the current market.”

“Low interest rates and government assistance packages like the First Home Loan Deposit Scheme put buyers in a strong position. The potential removal of stamp duty in NSW will be another boon for buyers and may spread to other states,” he said. “If you’re thinking about dipping your toe in the market this year, make sure you have a strong credit history, and shop around before signing up for a home loan.”

 

Article Source: www.brokernews.com.au

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