The value of new home lending tanked in July, dropping by $2.62 billion from the previous month in the biggest monthly decline on record in dollar terms.
ABS lending indicators for July showed that owner-occupier lending fell $1.44 billion, or 7%, from the previous month, in seasonally adjusted terms, while investor lending fell by $1.18 billion, down 11.2%.
Owner-occupier and investor lending figures for July are lower compared to a year ago, but higher than two years ago, when Australia was still in the early days of the COVID-19 pandemic and property prices were on the slide, RateCity.com.au reported.
The number of new owner-occupier first-home buyer loans fell 10.7% month-on-month in July. In dollar terms, the value of new first-home buyer loans slipped by $427 million in July, as interest rate hikes slashed first-home buyer budgets.
The proportion of fixed loans, including both new loans and refinancing, funded in July was just 5%, in seasonally adjusted terms.
At the peak in July 2021, 46% of all new loans were fixed.
Meanwhile, the national average new loan size for owner-occupier dwellings has continued to dip, down 0.12% or $746, but up $37,048, or 6.48%, compared to a year ago.
NSW, Queensland, Western Australia, and ACT recorded monthly drops, while all other states and territories rose.
“The dramatic drop in home lending in July echoes what we’re seeing in the property market, where would-be buyers are turning their backs on open homes in droves,” Sally Tindall, RateCity.com.au research director. “While rising interest rates are causing havoc on people’s property-buying budgets, others are stepping out of the market in the hope of finding a cheaper deal down the track. Suddenly, a ‘fear of missing out’ has pivoted to a ‘fear of getting in,’ particularly with further property price drops expected in the months ahead. Buying a home is one of the biggest purchases you can make. The idea of overpaying and watching property prices drop further is enough to spook even some of the most determined buyers.”
Tindall said that while falling property prices is welcome news for first-home buyers, many may still find themselves locked out due to rising rates.
“First-home buyers might not need as big a deposit, but they’ll still have to pass lenders’ serviceability tests – no mean feat when the bank is under instructions to stress test your finances at current rates, plus an additional 3%” she said.
