Home Insights Impact of RBA’s aggressive rate hikes seen in slump in new home lending

Impact of RBA’s aggressive rate hikes seen in slump in new home lending

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New housing loans recorded their second-largest monthly decline in July. This is because rapidly rising interest rates have made borrowing more expensive.

New lending, excluding refinancing, fell 8.5% in July and is now 11% lower than 12 months ago, according to Australian Bureau of Statistics data.

New lending to investors recorded its biggest month-on-month decline, down 11%, and first-time homebuyers fell 9.5%.

Compared to 12 months ago, first-time loans are down faster than any type of homebuyer, down a whopping 33%.

First-time homebuyers now account for just 14% of new mortgages, down steadily from a peak of 25% in January 2021.

The Reserve Bank’s rapid and aggressive interest rate hikes are having a big impact.Photo: Getty


As existing mortgage holders deal with higher interest rates, more people are looking to save money by refinancing. For owner-occupied homes, from July 2021 to 2022 he increased the value of external refinancing by 13%, outpacing his 8% rise across the market.

Since this data was released in July, the Reserve Bank has raised interest rates by another 100 basis points. Most analysts agree that it’s not done yet. This means a further decline in lending activity is likely over the next few months.

Rising borrowing costs combined with uncertainty about how long interest rates will continue to rise have added vigilance. In addition to this high inflation, it is not surprising that the real estate market has started to cool.

New loans for housing have fallen across the board.Photo: Getty


Consumer sentiment is now at recessionary levels after nine straight months of declines, according to the Westpac Melbourne Institute. In addition, their Home Buying Time Index dropped him 12% in the year to August.

Despite the changing dynamics in the real estate market, it’s important to add a little background. Markets are cooling, but he’s against the backdrop of one of the hottest growing seasons in Australia’s history.

Prices have fallen 2.7% nationwide from their peak earlier this year, but remain 31.5% higher than they were in March 2020. And while the average time it takes to sell a property has risen in recent months, properties in most markets are still selling significantly. faster than the long-term average.

Home prices are up 30% in two years, so you have to factor in the cooling market.Photo: Getty


In addition, there are still many prospects who are actively considering entering the market.

The total number of inquiries generated on realestate.com.au decreased by 19% in August 2022 compared to 2021, but inquiries increased by 6% compared to 2020 and increased by 32% compared to 2019 Increased.

However, the recent property market slowdown is expected to continue as the RBA is set to raise interest rates further.

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