New loan commitments picking up despite higher interest rates

New loan commitments rose 4.8% to $25 billion in May 2023, demonstrating that property buyers are becoming more aggressive despite 12 interest rate hikes since May 2022. there is

Investor loans grew the most at 6.2%, while owner loans grew 4%.

That would take new lending 45% above the recent low of $17 billion in June 2020.

New loans are on the rise as real estate buyers become more active. Source: Getty Images.

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In the short term, new commitments are unlikely to return to the highs of 2021, when interest rates were at historically low levels. However, lending has stabilized since the end of last year, and recent increases in May and March show that property seekers are willing to enter the market despite high lending rates.

It is also important to note that the number and value of new commitments are higher than pre-pandemic levels (February 2020). Total loans he increased by $5.6 billion, up 29%.

First-time Homebuyers and Investor Loans Increase

First-home buyers are starting to return to the market, with outstanding loans of $1.4 billion in May, up 5.5% from the previous month. Lending to first-time homebuyers peaked in January 2021 when $7 billion in new lending commitments were approved.

But as prices soared, newbies began to exit the market faster than investors and other owners.

In December 2020, new commitments to first-time homebuyers accounted for 25% of all loan approvals, outpacing those from investors.

However, when comparing the Prop Track Home Price Index and loan commitments for each buyer type, it is unlikely that the first homebuyers began cutting prices just 10 months into the pandemic, when prices began to rise by about 2% per month. it is clear.

This is a clear sign that prices are becoming out of reach for many looking to buy their first home.

Investors and other owners continued to borrow throughout 2021, but the pace slowed for the first rate hike.

Thanks to the popularity of homebuilder subsidies and record-low borrowing costs, first-house buyers will overtake investors in the share of new loans in mid-2021. But as soon as the subsidy period ended, loans for first-time home buyers dropped.

Property prices are also rising at record speeds, making it difficult for first-time homebuyers to buy property, even with ultra-low interest rates.

New Loan Owner Occupant and Investor Commitments by State

The biggest month-on-month growth in new owner and occupier lending by state was in New South Wales (NSW) and Tasmania (TAS), both of which grew more than 9%.

The Australian Capital Territory (ACT), Northern Territory (NT) and South Australia (SA) saw the biggest growth in new investor lending, all of which posted strong month-on-month gains.

New Loan Commitments of First Home Buyers by State

The number of new financing commitments for first-time homebuyers has increased, particularly in the ACT, New South Wales and VIC.
Canberra’s new loan commitments increased by 13% month-on-month. This is significant given that Canberra’s median house price is he second highest in the country.

Hot spots for first-time homebuyers and investors

Inquiry data from realestate.com.au reveals where the highest concentration of first home buyer and investor demand is across Australia.

While demand from these buyer types is still much lower than last year, there are many regions that saw an increase in inquiries in June 2023.

The Sydney and Perth regions saw the highest year-on-year increase in inquiry volume, while the Brisbane-West region took the top spot with the largest growth in both purchase types.

Indooroopilly is especially popular with first-time homebuyers due to its proximity to the University of Queensland, the CBD and other facilities.

Brisbane is a hotspot for first-time homebuyers and investors. Source: Getty Images.

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looking to the future

Buyer interest is growing as home prices are recovering and interest rates are set to take a breather this month.

New loan commitment data shows demand for real estate despite rising mortgage rates and a shortage of available inventory.

This improvement is also seen in the winter, when the market is seasonally quiet, and portends a strong sales season in the spring.

Check out more PropTrack insights

PropTrack Listing Report – June 2023

Regions with the largest annual increase in home prices