Cooling prices pushing property, mortgage demand

The latest housing finance data from the Australian Bureau of Statistics revealed that, in seasonally adjusted terms, 53,037 home loans were approved throughout the month of May, a 1.1 per cent increase on April.

According to Mortgage Choice CEO, Susan Mitchell, the data shows that there was an increase in the number and value of home loans approved. 

She said that the data shows $31.9 billion-worth of dwelling commitments were made throughout May, an increase of 0.5 of a percentage point on the month prior.

“It may be too soon to tell if APRA’s removal of the cap on investor loans is having any effect on the increase in demand for this type of home loan,” said Ms Mitchell.

She also said that CoreLogic data in May revealed that Australian dwelling values posted their first annual decline since 2012.

“In fact, national dwelling values slipped, led by a drop of 0.2 per cent in Sydney and a 0.5 per cent drop in Melbourne, which together have a significant effect on the national house market’s performance.

“This data is promising and suggests that housing affordability may be improving, enticing once cautious home buyers to enter the market, or property investors seeking a bargain,” said Ms Mitchell.

Change

The latest Mortgage Choice national home loan approval data has revealed borrower preference may be starting to shift.

An 11-month trend of variable rate preference could be coming to an end, with fixed rate home loans accounting for 18.67 per cent of all loans written in June — up from 17.93 per cent in May.

Ms Mitchell said that a combination of factors, including an increase in wholesale funding costs, regulatory changes and tightening lending policies are having an effect on the overall cost of borrowing.

“Cautious borrowers who recently entered the market may be aware that, despite a stagnant cash rate, lenders are increasingly making small, out-of-cycle rate increases on home loan products.

“These factors are pushing some borrowers, who are increasingly wary of the financial impact from future rate rises, to seek certainty by fixing their home loans.” 

She said that Mortgage Choice’s national home loan approval data shows that borrower demand for fixed rate home loans rose slightly in June.

“That being said, variable rate home loans continue to be the most popular type of home loan products across the nation.”