First Home Buyer Loans Slump to Six-Year Low

The number of new owner-occupier first home buyer loan commitments has fallen to its lowest level since February 2017.

According to new data from the ABS, of new owner-occupier first home buyer loan commitments fell 8.1 per cent, or $610 million, in January.

The overall value of new loan commitments for housing fell 5.3 per cent to $22.1 billion in January.

The value of total new owner-occupier loan commitments fell 4.9 per cent to $14.7 billion, while new investor loan commitments fell 6.0 per cent to $7.4 billion.

Every state recorded a fall except the ACT which was up 7.2 per cent.

Victoria’s 9.8 per cent fall was the worst, followed by NSW’s -4.9 per cent and WA with -5.4 per cent.

The value of owner-occupier housing loan refinancing between lenders fell 1.9 per cent but remained close to record highs at $12.7 billion. Borrowers continued to switch lenders for lower interest rates as the RBA’s cash rate target rose.

▲ The continuing decline is unsurprisingly being blamed on rising interest rates.

ABS head of finance and wealth statistics Mish Tan said first-home buyer lending continued to decline from the high reached in January, 2021. The decline coincided with the winding down of Covid stimulus measures.

“Anecdotal feedback from lenders suggested that reduced borrowing capacity due to rising interest rates further dampened overall demand for new housing loans in recent months,” she said.

In January in seasonally adjusted terms, the value of new loan commitments for construction finance fell 2.5 per cent after a rise of 99.4 per cent in December.

Loans for the purchase of property fell 0.7 per cent, after a fall of 6.6 cent the previous month.

The data continues to reflect the weight of interest rate increases which occurred in 2022, and before the RBA increased the rate again in February, with the promise of more rate increases to come.

HIA senior economist Tom Devitt said there were significant lags evident in this cycle and “we are unlikely to see the bottom in this data until the second half of the year, at the earliest”.

“The higher cash rate is compounding the adverse impact of the rising cost of materials, labour and land as well as the increased costs of compliance with the building code,” he said.

“There remains a large volume of work under way that will be completed in 2023 and this will keep national unemployment exceptionally low until early 2024.

“By continuing to raise rates the RBA risks a longer and deeper slowdown in economic growth than is necessary.”

Personal finance

The value of total new loan commitments for fixed term personal finance rose 0.5 per cent.

Lending for the purchase of road vehicles fell 0.4 per cent, while lending for the purchase of household goods rose 6.2 per cent to another record high.

Meanwhile lending for travel and holidays rose 0.9 per cent to the highest level seen since late 2018.