During September home loan financing in Australia fell. This drop occurred due to major Australian banks raising rates say finance experts. However, these experts predict that once the dust settles buyers will start buying homes again.
Home Loan Financing in Australia
According to the Australian Bureau of Statistics (ABS), home loan financing in Australia fell by 1.6 percent to $33.36 billion during the month of September. While the overall value of lending declined, there was noticeable differences between the amount lent to investors and owner-occupiers.
Investor lending plummeted, while owner-occupier lending rose. Investor lending dropped to $12.32 billion, which was the smallest monthly figure since August 2014.
Owner-occupier lending, on the other hand, rose by 3.0 percent to $21.04 billion. New lending also increased by 1.7 percent or $235.6 million to $14.29 billion.
In addition, the number of owner-occupier loans that were written during September increased by 2.0 percent. Home loans for construction increased by 1.9 percent, whereas the purchase of new homes increased by 5.4 percent. Home loan for existing rose by 1.8 percent.
Home Loan and Lending Restrictions
It is becoming evident that the restrictions that the Australian Prudential Regulation Authority (APRA) have put into place are beginning to have an effect on investor home buying. As a result, it is also becoming evident that owner-occupiers are now able to be more competitive in the market, and that they are able to purchase homes, whereas previously investors where pushing them out of the market.
For lenders, this means that while investor demand has declined, owner-occupiers are now picking-up the slack. However, it could also mean that banks are finding ways to change the classifications of some home loans that were previously designated for investment so that they can continue to increase their revenue.
Undoubtedly while interest rates remain at historic lows,it looks like there will be continued interest in buying a property.
Consumer and Business Confidence
Improvement in confidence levels for consumers and business has increased due to the weaker Australian dollar and increased political certainty since Malcolm Turnbull replaced Tony Abbott as the Australian Prime Minister. As a result, NAB have seen an increase in the levels of corporate credit demand. In fact, rising competition amongst lenders for business customers saw the bank have to cut its business lending interest rates so that they could attract more clients.
Australias Financial Outlook
According to financial experts, Australias economic outlook, medium-term, is anticipated to remain competitive. While mortgage demand has faltered this is viewed as a minor hiccup, which coincided with Australias big four banks ANZ, Westpac, NAB and the Commonwealth – raising their interest rates to meet APRA demands. Now that these banks have raised their holding capital sufficiently, it is highly unlikely that they will raise rates independent of the Reserve Bank in the future.
The Cooling Australian Property Market
The fall in property prices, especially in Sydney and Melbourne is also affecting the home loan market. Home auction rates in both capital cities are continuing to fall and auction rates are now at their lowest since March 2013.
Property experts are now predicting that Sydney and Melbournes overinflated prices will continue to fall. Prices in these capitals are expected to decline over the next 24 months with property prices becoming more realistic and affordable for owner-occupiers. Investors, however, who have bought at the higher-end of the market will need to hold on to their property for longer to realise sound capital growth. Those investors who were hoping to buy and then sell at an overinflated price, may have to cut their losses. This, in turn could provide owner-occupiers who are looking to buy a home to live in with a bargain buy.
Of course, if you are looking to buy a home as either an investor or owner-occupier, then its important that you consider your own personal and financial circumstances. Always review your borrowing power and what you can and cannot afford to repay on a mortgage, before you commit to buying a home. This will allow you to avoid any undue financial stress.
Are you looking to buy an affordable home? If you said YES, then contact eChoice, we can help YOU find the right home loan and save.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!