Investor lending drops to 2-year low as the housing market slows (ABS data)

Posted: 13 June 2018 1:17 pm
Skyscrapers and houses in the city.

The total number of owner-occupier loans fell by 1.1%, while first home buyers jumped to 17.6% of the market.

Mortgage lending continues to slip, with the latest housing finance figures from the Australian Bureau of Statistics confirming that slow investor lending is the primary cause.

Investment lending fell 0.9% between March and April this year (seasonally adjusted). Even with APRA planning to lift caps on investor lending this is a section of the property market that is really slowing down.

There are many causes, including falling house prices in Sydney and Melbourne, weaker appetite from overseas investors and tighter scrutiny by lenders.

Investor lending is now at its lowest levels since January 2016.

This brings good news for buyers worried about housing affordability and is causing a small boom in first home buyers.

But first home buyers are the only bright spot in an otherwise dull picture. Broken down the numbers look like this:

  • Construction of new dwellings is down 0.2%.
  • Purchase of new dwellings is down 3.7%.
  • Purchase of established dwellings is down 1.3%.
  • Owner occupier refinancing fell 0.3% after a 3.3% fall the previous month.

What does this mean for home buyers and investors?

It's clearly a good time for first home buyers to enter the market. Interest rates remain at historic lows and home prices in big cities finally seem to be slowing down.

But greater scrutiny from lenders means it's more important than ever to have your finances in order before applying. Interest rates will rise at some point (they can't really go any lower), meaning that lenders want to see that you can handle a rate rise.

Have a savings buffer and make sure to calculate your mortgage expenses while factoring in a rate rise. It's a simple, hypothetical exercise that can give you a more realistic picture of your borrowing capacity.

If you're thinking about investing it's clearly time to weigh your options. APRA will lift lending caps in July, which makes getting finance easier, but lenders will apply the same scrutiny to investors as to owner-occupiers. Investors need a cash buffer too.

Do your mortgage homework and think very carefully about where you're investing. Sydney and Melbourne aren't the whole housing market, after all.

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