New home lending slows but still flying

The breakneck pace of new mortgage commitments paused in June as lending for home construction faded further in the wake of the end of the HomeBuilder grant scheme.

The pace of monthly new housing finance commitments remain near record highs. Picture: Joel Carrett

The breakneck pace of new home lending paused in June as borrowing for home construction faded further in the wake of the end of the HomeBuilder grant scheme.

New home loan commitments fell by 1.6 per cent to $32.1bn, but the first decline in eight months still left commitments running 76 per cent higher than a year earlier and 64 per cent above pre-pandemic levels, seasonally adjusted figures from the Australian Bureau of Statistics showed.

Finance for building was the primary drag on overall new lending, dropping by 17 per cent in June to $2.6bn and extending a four-month decline.

New borrowing to buy an ­existing dwelling in which to live was broadly flat at $17.2bn.

New lending to prospective landlords edged up 0.7 per cent to $9.2bn.

Coolabah Capital economist Kieran Davies said “the boom in housing finance could be ­peaking”.

“That said, loans to owner-occupiers for the purchase of ­existing homes remain extra­ordinarily high and lending to ­investors is still trending higher given the low level of mortgage rates,” Mr Davies said.

“Although loans for the construction of new homes should decline further, a backlog of work should see residential construction boost GDP through to the second half of this year.”

Separate ABS data on housing construction approvals also showed the impact of the end of the commonwealth incentive scheme. The number of new dwelling approvals dropped 6.7 per cent in June to 18,911, from a near-record high of 23,099 in March and against roughly 15,000 monthly approvals leading into the pandemic.

Approvals to build houses – rather than units – fell almost 12 per cent, the seasonally adjusted data showed, but are still 44 per cent higher than a year earlier.

ABS head of finance and wealth Katherine Keenan said the fall in construction lending “followed a period of rapid growth between July 2020 to February 2021 in which the value of loan commitments rose by 150 per cent”.

“This strength continued to unwind after the reduction in January of the HomeBuilder grant and its subsequent closing in April,” Ms Keenan said.

The ABS housing finance figures showed that by state, new owner-occupier home lending fell by the most in Western Australia – by 6.9 per cent – followed by Victoria, which had a 5.8 per cent fall. Finance approvals to buy a home in NSW dropped 3.2 per cent but rose 1.8 per cent in Queensland and 7.4 per cent in the ACT.

First-home buyer commitments fell 7.8 per cent in June, the second straight monthly decline, but still almost 50 per cent up on a year earlier. New construction contracts after the end of March were not eligible for the HomeBuilder scheme.