Home lending hits record highs as Aussies commit to mortgages

Aussies are committing to new home loans at soaring rates with FOMO one of the reasons for the boost in property uptake.

Home lending has hit an all-time high with the latest figures from the Australian Bureau of Statistics (ABS) showing new home lending hit a record $28.75 billion in January, up 44 per cent year-on-year, and up 10.5 per cent from the month prior.

The total value of owner-occupier home loans settled in January was at a record high of $22.11 billion, up 52 per cent year-on-year and 11 per cent higher than the previous month.

Mortgage holders kicked off the new year by refinancing their loans, with a 6.8 per cent increase in borrowers switching to a new lender in January, according to Canstar analysis of the ABS Lending Indicator data.

Driving the property market boom are record-low mortgage rates and Government schemes including the First Home Loan Deposit Scheme and the HomeBuilder grant.

More Aussies are getting home loans while others are refinancing. Picture: iStock

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“Record low rates have significantly boosted the amount people can borrow. That means people are putting their hands up at auctions for properties they previously might not have been able to afford,” RateCity research director Sally Tindall said.

“Government incentives are also driving sales, along with a fear of missing out, particularly among those yet to get a foot on the property ladder.”

The number of first homebuyers has increased 70 per cent from the same time last year, according to the ABS.

“While it’s great to see first homebuyers finally get the keys to their new home, when bidding at auction people need to be careful about how much debt they take on,” Ms Tindall said.

“With house prices expected to rise this year, and pressure on buyers to overcommit themselves in fear of missing out, responsible lending laws are now more important than ever.”

Canstar group executive of financial services Steve Mickenbecker said Government incentives and record low interest rates – which will be reviewed at Tuesday’s Reserve Bank meeting – have encouraged buyers to enter the market.

It’s a hot property market as demand continues to includes. Picture: NCA NewsWire/Gaye Gerard

“A combination of low interest rates, government incentives and pent-up demand post the COVID-19 peak have proven to be a potent mix,” he said.

“Property demand has run way ahead, with the fear of missing out becoming a powerful psychological driver as Government incentives and low interest rates have encouraged first home buyers and home builders into the market in a rush,” Mr Mickenbecker said.

“Home lending continues to bounce back from the earlier impacts of the pandemic, with the value of new lending in January rising for the eighth consecutive month. The value of refinancing activity is also on the rise, at its highest level since October 2020,” he said.

Mr Mickenbecker said the Reserve Bank looks likely to find itself “under property price pressure a lot sooner than it had expected”, with reports stating housing prices climbed in February.

“The Reserve Bank doesn’t expect to raise the cash rate for three years or more, but unless property prices can be slowed it will have to start looking for some way to apply the brakes,” he said.

Mr Mickenbecker added first homebuyers and new construction are leading the charge for property buying rather than investors.

“Property prices are booming in a market under-supplied with listings through 2020 and into the early months of 2021 as buyers snap up new offerings,” he said.

Homebuyers are keen to get in the market, spurred on by low interest rates and Government incentives, while others just don’t want to miss out. Picture: NCA NewsWire/Gaye Gerard

“New construction will lift national housing stock and first homebuyers will be vacating rentals, which must eventually find their way onto the market in the face of likely continued slow population growth from reduced migration, student intake and tourism,” he said.

“The tried and true mix of Government incentives and low interest rates has continued to be proven successful as first homebuyers and home builders continue to rush into the market,” Mr Mickenbecker said.

Mark Crosby, a macroeconomist at Monash University, warned household debt is already at concerning levels. “There is an implicit assumption forming that property prices won’t fall and it is fine to gear up. Same as 2008, and many previous speculative bubbles,” he said.

Meanwhile, house prices have climbed to record highs.

REA group director of economic research Cameron Kusher said surging buyer demand had resulted in hot market conditions and climbing house prices.

“Property prices have clearly responded positively to state and federal government housing stimulus along with the lowest borrowing costs on record,” he said.

“The main potential bump in the road to recovery will be what happens as government and banking support is wound down over the coming months,” Mr Kusher said.

“While the share of mortgages on deferral remains low, the removal of JobKeeper and JobSeeker may lead to an increase in forced property sales.”