Affordability issues may be starting to play out in the property market. Image – Canva.
  • While total house loans rose 0.2%, they fell for 'dwelling only' purchases in July
  • Despite the fall, the total loan value remains near record levels
  • Refinancing has also reached all-time high

The value of new total loan commitments (seasonally adjusted) rose during July, Australian Bureau of Statistics (ABS) data has shown. However, this is masking a different property story.

Total housing loans saw a 0.2% rise, while personal fixed-term loans rose 14.2% as did business construction by 56%, although, this latter category is usually volatile.

For July 2021, the value of new borrower-accepted housing loan commitments was $32.12 billion, with $22.7 billion by owner-occupiers and $9.35 billion for investors.

The total housing commitments included loans for land, alterations and renovations. Looking solely at dwelling purposes, housing loans actually fell 1.1% during the month.

“Home loan [for dwellings] activity has continued its recent decline as falling affordability driven by booming house prices increasingly constrains buyers.”

Dr Andrew Wilson, consultant economist, Bluestone Home Loans

Smaller, but still large

Despite this slight decline, activity remains at near-record levels.

Over the first seven months of 2021, seasonally adjusted, values increased by 54.4% compared to the same period in 2020.

Most of the states reported declines in home lending over July. NSW and NT bucked the trend by reporting increases of 0.4% and 3.0% respectively.

Home lending has now fallen over consecutive months for the first time since May last year. With severe Covid-related lockdowns and restrictions in place for much of the country, it is likely this will continue to impact dwelling lending activity.

However, Dr Wilson is optimistic given the historically strong demand.

“Underlying home buyer appetite, however, generally remains strong with the easing of restrictions, hopefully sooner rather than later, set to drive a sharp revival in activity as evidenced when lockdowns ended last year,” he said.

“Sharply higher house prices however have predictably acted to moderate buyer activity as rising affordability constraints continue to ease home lending.”

Refinancing reaches an all-time high

When announcing lending commitments, the ABS added that borrower refinancing of housing loan commitments between lenders had also reached an all-time high of $17.2 billion, after a rise of 6% during July.

“The value of refinancing between lenders was 60 per cent higher in July 2021 compared to a year ago,” said ABS’s head of finance and wealth, Katherine Keenan.

“This reflected borrowers seeking out lower interest rates, particularly for fixed-rate loans, and cashback deals across a large number of major and non-major lenders.”

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