Home borrowing boom hits record $31bn in April

Households committed to $31bn in new mortgages in April, marking another high amid a property price boom and low rates.

New mortgage lending climbed again in April to set new monthly records. Picture: AAP

The “red hot” Covid borrowing boom continued into April, as new home lending lifted a further 3.7 per cent to a fresh monthly high of $31 billion amid surging property prices and low rates.

The value of total new housing finance commitments was up almost 70 per cent on a year earlier, according to the Australian Bureau of Statistics, and 55 per cent above average levels recorded before the pandemic.

The value of new loan commitments for owner-occupier housing also forged a new high, up 4.3 per cent in April at $23 billion, the seasonally adjusted figures showed.

Households continued to take out bigger loans, with the average mortgage rising almost 6 per cent to a record $563,550 for those buying existing dwellings in which to live. Investors signed up for loans worth $8.1 billion in the month, an increase of 2.1 per cent after surging by 14 per cent in March.

New monthly lending for landlords is now at its highest level since mid-2017, but still 20 per cent below the peak of more than $10 billion recorded six years earlier. Property prices across the eight capital cities have jumped 9.4 cent over the past year, and 15 per cent in the regions, creating an increasingly febrile atmosphere among buyers.

CBA head of Australian economics Gareth Aird described the latest borrowing numbers as “red hot” and that “the strength in lending means that home prices will continue to rise strongly over the near term”.

Intensifying affordability issues have probably contributed to the third consecutive monthly drop in the number – rather than value – of loans approved for first-home buyers: down 1.9 per cent to 15,171 in April.

Loans to first-time buyers peaked at 16,257 approvals in January – the highest number since a wave of first-home buyer incentives and falling rates triggered a similar surge in the wake of the global financial crisis.

“The early evidence indicates the baton has now been passed from first-home buyers to investors,” Mr Aird said.

New personal loan commitments to buy household goods are also running at historically high levels, inching up to $100 million in April.

The rise in owner-occupier lending was driven by increased loan commitments for existing dwellings, up 9.2 per cent.

While the RBA has said it was unlikely to lift the cash rate until 2024 at the earliest, banks in recent weeks have begun lifting fixed home loan rates as they factor in the slow removal of other, unconventional policy measures.

Jarden Australia chief economist Carlos Cacho said the prospect of higher borrowing costs, however minimal, “could take a little bit of heat out of the market in the second half of the year”.

“That’s probably not a bad thing,” he said.

Loan commitments to owner-occupiers to build new houses fell 11.4 per cent, following a fall of 14.8 per cent in March, the ABS said.

“These were the first monthly declines since the HomeBuilder grant was introduced in June 2020,” ABS head of finance and wealth Katherine Keenan said, although “the value of construction commitments remained at a high level”.

The HomeBuilder grant was reduced from $25,000 to $15,000 effective from January 1 and was closed to new applications from April 14.

Amid talk that the regulator may eventually be forced to step in to limit the pace of new borrowing should speculative lending lift financial stability risks, the Reserve Bank governor Philip Lowe on Tuesday said the central bank was “monitoring trends in housing borrowing carefully”.

However, RBA assistant governor Michele Bullock, in a parliamentary hearing, noted that lending standards were “not being relaxed”.

Earlier this week APRA chairman Wayne Byres said ultra-low interest rates were one of the forces buffeting the financial system.