Value of new home lending falls for the first time in 2021

The total value of new loans fell in June for the first time this year, according to new ABS Lending Indicators data.

New home lending declined by 1.6% from the month prior to reaching $32.05 billion in June.

The decline was largely driven by a drop in owner-occupied borrowing, which was down 2.5% over the month to reach $22.86 billion.

This was the largest fall since May 2020.

Investment lending bucked the trend, with the value of new investment lending growth for the 8th consecutive month, rising by 0.7% in June to reach $9.19 billion.

The vast majority of new lending resides with the major banks, with $17.05 billion worth of owner occupied loans and $7.31 billion of investment loans with the big four banks.

Experts commentary

Canstar Group Executive, Financial Services, Steve Mickenbecker said:

“For the first time in eight months, new housing lending has retreated in June, coinciding with the start of Sydney’s recent COVID-19 outbreak. With the lockdown extending, you would have to expect a softer July coming next, as already foreshadowed by lower auction prices.”

First home buyers and loans for construction have slowed over the month as incentives wind back.

The investment market remains resilient, though also more subdued, and investors may view the softening in prices as a buying opportunity in anticipation of the same rebound we saw from the first lockdown in 2020.

We shouldn’t overestimate the depth of June’s fall, with the month still up 84 per cent a year ago, when we were in the depths of the first COVID-19 lockdown.

Homeowners have driven up refinancing over the month, by a huge $2.8 billion.

The opportunity to take advantage of the low-interest-rate environment to get ahead on the loan is drawing borrowers into the market. Canstar lists 181 loans below 2 per cent with 161 of these are fixed rates and 20 are variable rates.

In spite of many who wish to call the demise of the big banks, they still provide around three-quarters of new lending, currently buoyed by low fixed-rate loans to complement their ever strong brand and distribution advantages.”

Borrowers should not allow complacency to drive them into a loan with a known big bank brand.

Though the major banks’ fixed rates are historically low, their lowest fixed rates still remain 10 to 20 basis points above the lowest in the market.

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