Home lending jumps as mortgage rules ease

Mortgage lending jumped as rates were cut and as banks softened checks on borrowers’ ability to repay loans.

Australian households have been taking advantage of interest rate cuts and greater access to finance, with the number of new loans approved in July surging 3.9 per cent to $32.24 billion.

Lending to owner-occupiers (excluding refinancing) rose 5.3 per cent in July, new data from the Australian Bureau of Statistics shows.

Refinancing of existing home loans also increased 5.4 per cent as home owners look to get the best value for money.

Property analyst CoreLogic’s head of Australian research, Tim Lawless, said the findings were expected but the pace of growth was surprising.

“This is a really strong reading for July. We haven’t seen monthly numbers of this magnitude since 2016 for investors and 2015 for owner-occupiers,” Mr Lawless said.

“It’s an indication that all the stimulus that is flowing through the marketplace is now starting to show up in credit flows.”

Lending commitments have been rising throughout 2019.

In July, the Reserve Bank approved a second cut to interest rates in two months, bringing rates down to the current low of 1 per cent.

In the same week, banking regulator APRA lowered the serviceability floor on home loan approvals from 7 per cent to a buffer of 2.5 per cent over the loan’s interest rate.

House prices had also begun to stabilise in the month prior, with Sydney and Melbourne each recording growth for the first time since 2017.

The data has also shown investors have started to wade back into the market, with the number of new loans (excluding refinancing) up 4.7 per cent through July.

However, as a share of the market, investors make up just 26 per cent compared to the 43 per cent share seen in 2015.

The number of new loans by existing homeowners outpaced first home buyers for the first time since December 2018, growing 4.2 per cent compared to 1.3 per cent in seasonally adjusted terms. Market entrants still have a larger than average market share of 29 per cent.

“The fact that we are starting to see more upgrades and downsizers coming back into the market probably does reflects the great deal of pent-up demand,” said Mr Lawless.

“We’ve been seeing buyers generally waiting on the sidelines for the housing market to improve. So, now that we’re starting to see more subsequent buyers reinforces the fact that housing sentiment is improving.”

Mr Lawless said the surge in valuations ordered in August indicates the trend is likely to continue over the coming months.

Total lending for the July - including refinancing, personal finance, renovations, and lease finance - increased by 1.3 per cent to justover $65 billion.

News about the lift in lending came as rising clearance rates did little to lift the number of homes going to auction over the weekend, with volumes down from the week before Clearance rates were high, however, with a preliminary clearance rate of 83.1 per cent from 522 auctions in Sydney, while Melbourne auctions cleared 76.6 per cent of 769 properties.