New home loan commitments slip in January as rate hikes squeezes borrowing power

Australians, under pressure from the increased cost of living, took out fewer home loans across the first month of 2024.

Australians took out fewer home loans in January as elevated interest rates, high but easing inflation, and a soaring Commonwealth tax take hammered household budgets.

The number of new home loan commitments slipped 3.9 per cent over the month, the Australian Bureau of Statistics reported on Thursday.

A fall in the number of new loans purchased by owner-occupiers was the most significant contributor to the decline, falling 4.6 per cent, while mortgages taken out by investors fell more modestly by 2.6 per cent, the data showed.

“Liaison with lenders suggests recent improvements to loan processing times increased the number of loans processed in peak periods this year, relative to prior years,” the Bureau’s head of finance statistics Mish Tan said.

Since the Reserve Bank began hiking rates in May 2022, Australians’ borrowing power has been squeezed dramatically.

For example, the amount a family with two children and a household income of $150,000 can borrow has plunged by 32.8 per cent or $247,600, while the cost of servicing an average mortgage has climbed by more than $1500.

Residential refinanced mortgages also continued to slide, falling 7.6 per cent last month.

As borrowers have rolled off ultra-cheap fixed rate loans, many looked to refinance their debts with banks offering competitive rates to retain their customers and bring on new ones.

However, the rush to refinance has slowed considerably since its peak in July, as Australia passed the peak of fixed-rate expiries.

Loans to owner occupiers and investors fell over January, the Bureau reported. Picture: NCA NewsWire /Brenton Edwards

Residential refinance mortgages to owner-occupiers are now 30.8 per cent lower than a year ago, the Bureau said.

“The volume of loans being refinanced was comparatively higher than new loans for the first half of 2023, but has since fallen sharply as lenders reduced competitive cashback offers,” Dr Tan added.

The slide in new home loan commitments comes as separate data released earlier this week suggests Australians remain aspitational, and are feeling increasingly confident of owning their own home.

The latest Westpac Home Ownership Report released on Wednesday found 44 per cent of Australians plan to buy a new home in the next five years, up 9 percentage points since July 2023.

More Australians are also planning to buy an investment property, upsize their home, or renovate an existing dwelling, the research found.