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  • March saw a 3.1% surge in new lending, fueled by proactive first-time homeowners and investors, signaling market resilience amid rate speculation.
  • First-home buyers drove a notable 4.4% increase in loans, while investors capitalised with a 3.8% uptick, affirming confidence in the market's growth trajectory.
  • Despite rate uncertainty, borrowers remain active, highlighting the importance of staying informed and proactive in navigating Australia's dynamic property landscape.

Released today, the latest ABS Lending Indicators data show that in March, the value of new lending soared by 3.1%, marking the second consecutive month of growth. This surge is attributed to buyers, particularly first-time homeowners, who are opting to enter the market now rather than wait for anticipated rate cuts.

The appeal of reduced borrowing costs, coupled with concerns about missing out on surging property values, has ignited robust activity among first-home buyers. March witnessed a substantial 4.4% uptick in loans compared to the previous month, marking a noteworthy surge of 17.9% from the same period in 2023.

Investors are also seizing the moment, capitalising on favourable market conditions. New loans for this group surged by 3.8% month-on-month, totalling an impressive $10.17 billion in loan value. Year-on-year, this segment has experienced a remarkable 31.1% rise.

Furthermore, the market for ‘downsizers and upgraders’ has seen a modest increase. Though comparatively smaller, there was a 2.1% rise in loans, amounting to a total of $12.29 billion in March.

DATA SOURCE: based on ABS Lending Indicators (March 2024)

“Expectations of lower interest rates and rising house prices are driving all sorts of buyers back into the market, which is starting to look like the boom times of 2021 before rate rises hit,” comments Canstar’s finance expert, Steve Mickenbecker.

“The latest higher inflation numbers will likely mean lower interest rates are further off and could dent this confidence in coming months, but buyer sentiment is strong.”

The dominance of the Big Four

Despite the diverse array of lenders available, the dominance of the Big Four banks in new loan settlements remains significant. Approximately three-quarters of all new loans in March were settled with a major bank, underscoring their enduring appeal to borrowers.

This trend signifies a 4.3% increase in market share for the major banks over the past two years, highlighting their formidable position in the lending landscape. Mickenbecker shares, “The big banks emerged from COVID lockdowns flush with deposits and until recently have been under no great pressure to pay savers high rates to attract funding, allowing them to compete in the housing loan market more aggressively.”

However, he warns that borrowers should be wary of solely relying on big brand lenders, as exploring alternative providers could unveil better deals and savings opportunities. “While not all of the big lenders are at the bottom end of the interest rate range, they are offering rates that are competitive enough when augmented by distribution and brand power. Borrowers might have to look amongst the big bank’s secondary brands to find the best of their home loan rates.”

Seizing savings amidst rate fluctuations

While new lending activity flourishes, the refinancing market experiences a slight downturn. At $16.02 billion in loans refinanced to new lenders, this was down 2.5% compared to the previous month. However, this dip shouldn’t deter borrowers from exploring refinancing options, especially amidst expectations of future rate cuts.

DATA SOURCE: based on ABS Lending Indicators

With potential savings of over $300 per month or thousands annually, refinancing presents a compelling opportunity for homeowners to optimise their financial position. By leveraging competitive rates and flexible terms offered by lesser-known providers, borrowers can unlock significant savings and enhance their financial wellbeing.

Mickenbecker reiterates this, saying “Canstar’s analysis shows the 4.25 percentage point increase in the cash rate since the beginning of May 2022 adds approximately $1,562 to repayments on a $600,000 loan over 30 years or $2,603 on a $1 million loan.

“While some borrowers aren’t waiting for the Reserve Bank to instigate a rate cut, the message to other borrowers is don’t wait, make the cut happen for yourself. The higher quarterly inflation figure reported for March means relief for borrowers is likely to be further off if they leave it in the hands of the Reserve Bank.”

Making informed decisions in a dynamic market

As the Australian property market continues to evolve, it’s imperative for homeowners and investors alike to stay informed and proactive. Whether it’s seizing opportunities in the new lending market, exploring alternative lenders beyond the Big Four, or considering refinancing options, empowerment through knowledge is key.

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