December, 2022

Refinancing continues to surge

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New loan activity wanes but refinancing soars

With the Reserve Bank of Australia (RBA) increasing the cash rate from 0.1% in April to 3.1% in December, high levels of home loan refinancing activity show no signs of abating.

Data from online property exchange PEXA confirm the trend. In fact, the PEXA Refinance Index for the week ending 6 December hovered close to its September 2022 peak of 179.5 points.

Figure 1: Volume of refinances across Australia

Source: Pexa Refinance Index, 13 December 2022

In December, the RBA indicated that a further increase in inflation is anticipated in the  early months of 2023. It therefore expects to “increase interest rates further over the   period ahead”.

In a recent article, PEXA’s Chief Economist Julie Toth suggests the transmission of interest rate rises to borrowers will continue to negatively impact the disposable income of variable rate–mortgage holders into the new year.

“PEXA’s research indicates that rising interest rates are driving record numbers of borrowers to refinance their loans,” Toth says.

“Our consumer research confirms a strong appetite for Australians to shop around for the best loans possible. This is warranted, given that consumers can save an estimated $1,524 per year on average by seeking out new financing options. This is in addition to cash-backs and other incentives being offered to refinancers by major home loan providers.”

The size of refinance loans is also increasing

The Adviser reports that the size of home loans accessed for refinancing is also rising.

The article cites data from Joust’s Live Auction service, which indicates a 6.15% increase in the size of ‘refinance’ loans across Australia, from $508,838 in October 2021 to $540,149 in October 2022.

In the report, Joust Chief Executive Carl Hammerschmidt says that there are now “clear signs” borrowers were not initially prepared for the 2022 rate increases.

According to Hammerschmidt, “the increase in people across most states looking to refinance larger home loans shows that those who got into the market during record low interest rates are now finding themselves over-extended”.

The size of new loans is falling

At the same time, there appears to be fewer new loans granted for residential and commercial property purchases. New homeowners are likewise taking out smaller loans.

Joust data reveals a 16.97% fall in the size of home loans accessed by the online marketplace’s ‘buy’ category, decreasing from $725,586 in October 2021 to $602,430 in October 2022. Loan sizes in the ‘build’ category also dropped 11.17%, from $767,243        to $681,538.

Toth notes that renters who aspire to home ownership may be happy to see house prices fall, but their maximum loan size is becoming progressively smaller as rates increase.

“We are now seeing fewer people moving from renters to first home owners, and at lower average price points. This places further pressure on rental markets, at a time when rental availability and affordability are at record lows in many locations,” Toth says.

A year to refinance?

According to Loan Market’s Senior Finance Specialist Brett Richardson, 2023 will be a year of refinancing.

“[The year] will see mortgage holders looking to refinance to a lower variable rate or will consider fixing for certainty. Households will need to direct more money towards    mortgage repayments and have less disposable income,” he says in a report by The Property Tribune.

“With the higher cost of living and mortgage repayments continuing to increase in 2023, inflation will continue to be higher. This could see mortgage stress, with property prices possibly declining.”

Mortgage brokers, in particular, should be aware of the challenges and opportunities the new year will bring.

 

November, 2022

Borrowers face record high repayments ahead

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An environment of increasing interest rates

After raising the cash rate seven times in a row, the Reserve Bank of Australia now expects home loan payments to reach record levels. However, not every borrower is in for a mortgage shock as many are still ahead on their repayments.

According to the RBA, home loan payments are set to rise further “as a result of the increase in home loan interest rates” already seen over 2022.

“This included the effect of fixed interest rate loans rolling off over time,” said the central bank in its November board meeting. It expects the cumulative increase in interest rates to force mortgage payments as a share of household income to reach levels not seen since 2010.

The RBA has so far hiked the official cash rate seven times this year to 2.85% in November. This has driven up the average variable housing loan rates from around 2% to about 5%.

 

Figure 1: Australia's average housing interest rates

Source: Reserve Bank of Australia November Chart Pack,, November 2022

The good news is that many Australian borrowers are still ahead on their housing loan repayments, providing some cushion to the impacts of continued rate rises.

“Payments into offset and redraw accounts were still high, but somewhat less over 2022 than the preceding year,” noted the RBA.

Around 70% of ANZ’s home loan variable rate customers, for example, had accelerated payments as of October 2022. “And of that 70%, a half of them are more than two years ahead,” said ANZ CEO Shayne Elliott in a recent interview.

“As interest rates rise for many of those customers, nothing changes,” added Elliott. “As of today, people who are under stress with home loans that are 90 days past due are beginning to fall. So we have not yet seen a pickup in distress.”

 

Borrowers to feel impact of higher rates

Westpac has likewise not seen a spike in financial hardship or stressed assets among its home loan borrowers.

“Many customers built up savings during the past two years, and 68% remain ahead on their mortgage repayments,” said Westpac Chief Executive Peter King.

But this is bound to end for some borrowers as interest rates look set to rise further. Economists expect the central bank to hike the cash rate by another 25 basis points in December as it fights stubborn inflation, which reached a 32-year high of 7.3% over the 12 months to September 2022.

“The RBA will likely want to see more of a tapering in demand to avoid a sharp breakout in wage growth,” said Sean Langcake, Head of Macroeconomic Forecasting at BIS Oxford Economics. “We expect to see a further 75 basis points of tightening before the RBA pauses the current rate hiking cycle.”

Customers with fixed rate mortgages are expected to bear the brunt of further rate rises as their fixed terms end.

“It is inevitable that the impact of higher rates will be felt,” said King.

 

Figure 2: Fixed housing interest rates (three-year maturity)

 

Source: Reserve Bank of Australia November Chart Pack,, November 2022

 

A potential rise in arrears

While home loan delinquencies over the 12 months to May 2022 fell in most Australian states, Moody’s predicts an increase in mortgage arrears over the next year as rising interest rates and cost of living and falling property prices bite.

“Falling house prices will increase the risk of home loan delinquencies and defaults, because a weakening housing market will make it harder for borrowers in financial trouble to sell their properties at high enough prices to repay their debt,” said Moody’s.

For mortgage brokers with clients who might struggle to meet repayments, now is a good time to speak to them and walk them through their options. Perhaps they can negotiate for better mortgage rates? Or is refinancing their best option?

 

October, 2022

Is the housing slump easing?

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Property prices continued to fall in September, but homeowners may be set to get a reprieve according to CoreLogic’s Home Value Index. The Index reveals that the rate of decline eased from 1.6% in August to 1.4% during the first month of spring.

The slowdown was apparent in all the capital cities, except for Adelaide and Perth where rates of decline accelerated compared to the previous month. However, both cities continue to record only a slight decrease in prices (0.2% and 0.4% respectively). Regional areas in South Australia and Western Australia are the only housing markets showing growth.

In Sydney, the monthly rate of decline eased from 2.3% in August to 1.8% in September. Brisbane’s rate of decline fell from 1.8% to 1.7%, while Melbourne’s eased from 1.2% to 1.1%.

Darwin is the only capital city where housing values are remaining steady, although they continue to be 10.1% below the city’s 2014 peak.

Figure 1: Monthly change in home values for September 2022

Source: CoreLogic Home Value Index, October 2022

While the easing rate of decline is positive news for homeowners, CoreLogic’s research director, Tim Lawless, cautions against assuming the housing market has come through the worst of the downturn.

“It’s possible we have seen the initial shock of a rapid rise in interest rates pass through the market, and most borrowers and prospective homebuyers have now ‘priced in’ further rate hikes,” he says. “However, if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again.”

CoreLogic also noted improvement in several other key indicators during September.

“Auction clearance rates also trended upwards, albeit subtly, in September, and consumer sentiment nudged a little higher as well on the back of strong labour market conditions,” Lawless said.

Michael Yardney, director of Metropole Property Strategists, believes there are “early signs that the market is looking for a bottom”.

“Auction clearance rates have risen to the highest levels since May despite more properties being offered for sale and another rise in interest rates,” he said. “With inflation forecast to peak in coming months, it’s possible our housing markets could move back into positive territory early next year,” he said.

 

Values are falling but many homeowners are still ahead

After rising 25.5% during the recent growth cycle, capital city housing values are now 5.5% below the recent peak. Regional values, which recorded stronger growth conditions through the upswing (41.6%), are down 3.6%.

Despite this, many homeowners continue to have a substantial buffer between current housing values and where they were at the beginning of the COVID-19 pandemic in March 2020. 

Looking at the capital cities’ combined figures, housing values would need to fall another 13.5% before wiping out the gains of the recent growth cycle.

 

Figure 2: Housing values in the capital cities and regions since the beginning of the pandemic

Source: CoreLogic Home Value Index, October 2022

 

Slow start to Spring as vendors hold back new listings

A fall in the number of fresh listings added to capital city housing markets during September – which is when the market normally starts to ramp up again after winter – may be a factor behind the easing rate of decline in housing prices.

 According to CoreLogic, the number of new listings in capital city markets during the four weeks to 25 September was 12% lower than the same period in 2021 and 10% below the previous five-year average.

While the mortgage ‘cliff’ many homeowners face when low fixed-rate loans secured during the pandemic start to expire next year may see many sell up, Lawless says he hasn’t seen any evidence of distressed sales or panicked selling through the downturn to date.

“It seems prospective vendors are prepared to wait out the housing downturn, rather than try to sell under more challenging market conditions,” Lawless said.

 

Figure 3: New listings in Australia’s capital cities, shown as a rolling 28-day count

Source: CoreLogic Home Value Index, October 2022

While property market conditions have undoubtedly changed since the market peaked earlier this year, PropTrack Economist Angus Moore believes it is “too soon to be able to draw firm conclusions” about how the market will fare during spring.

“Looking further ahead, the fundamental drivers of demand remain strong, with unemployment very low, wages growth expected to pick up over this year, and international migration increasing,” he said.

September, 2022

Australians are the richest in the world

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Many people in Australia might be grappling with the rapidly rising cost of living. But a new report shows Australians are the wealthiest people in the world as property and share values rose sharply last year.

According to Credit Suisse’s latest global wealth report, the median net worth of an Australian adult increased by US$28,450 to reach more than US$273,000 in 2021. This put Australia ahead of Belgium’s US$267,890 and New Zealand’s US$231,260, which came in second and third in global median wealth.

A major source of Australians’ wealth increase was the record-breaking year for the local property market. National housing values rose more than 22% over the year in the fastest annual growth ever recorded.

Figure 1: Median wealth by country 2021

Source: Credit Suisse, Global Wealth Report 2022

Nevertheless, says Credit Suisse, “The overall composition of assets or wealth has not changed a great deal in Australia since 2000. The share of financial assets in gross assets was 39.5% in the year 2000 and 39.0% at the end of 2021.”

The share market also rose in 2021, with the ASX 200 delivering a total return of 17.2% over the year. Finder’s Consumer Sentiment Tracker found that individual investors earned an average annual return of A$5,356 based on a portfolio of A$31,613.

In terms of mean wealth, the average Australian adult had US$550,110 in 2021 after seeing an annual increase of US$66,350 in their net worth. This put Australia at number four in the world, after Switzerland, the United States and Hong Kong.

Source: Credit Suisse, Global Wealth Report 2022

 

More millionaires

Soaring asset prices turned 390,000 Australians into millionaires, bringing the total to nearly 2.2 million in 2021. Australia now occupies the eighth spot as a millionaires’ hub, behind the United States, China, Japan, the United Kingdom, France, Germany and Canada.

“Over the next five years, the number of USD millionaires in Australia is expected to increase 35%, from 2.2 million in 2021 to 2.9 million millionaires in 2026,” says Michael Marr, Head of Wealth Management Australia at Credit Suisse.

As the club of highly affluent Australians expands, wealth inequality has also gone up. The richest 1% of Australians held 21.8% of the country’s wealth at the end of last year, increasing from 19.6% in 2007.

“This rise in inequality is in line with the moderate increase in financial assets relative to non-financial assets since the former is less equally distributed,” says the report.

 

Slower growth ahead

Several factors will likely constrain future growth in wealth, including the falling property market as interest rates continue to rise. Home prices across Australia are forecast to record a peak-to-trough decline of between 15% and 20%. National housing values have so far fallen for four consecutive months, dropping 1.6% in August over July.

“Looking forward, we remain watchful as to the impact of rising inflation [and] the inevitable increase in interest rates, with the knock-on effect on the valuation of the two principal sources of wealth, housing and financial assets, underpinned by GDP [growth],” says Marr.

Australia’s GDP is predicted to grow by 3.25% over 2022, and 1.75% over the next year – lower than the previous forecasts of 4.25% this year, and 2% over 2023.

But Credit Suisse expects wealth around the world to continue rising over the long term.

“Our forecast is that, by 2024, global wealth per adult should pass the US$100,000 threshold and that the [global] number of millionaires will exceed 87 million individuals over the next five years,” says Nannette Hechler-Fayd’herbe, Global Head of Economics & Research at Credit Suisse.

August, 2022

The pressure is on for small business

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Just as soaring prices bite at household budgets, businesses are dealing with their own financial pains. The costs of debt and doing business are rising, and there’s no more pandemic-related government support to provide some buffer.

According to an Australian Bureau of Statistics survey, 46% of businesses saw an increase in operating costs in June, more than double the share of companies the previous year. An equally high proportion (44%) were expecting operating expenses to climb in July.

But a bigger headache for businesses, especially small ones, is poor cash flow.

Recent research from accounting software firm Xero found that 92% of small businesses had negative cash flow at least once in 2021. This experience lasted more than six months for one in five companies. On average, Australian small businesses went through 4.2 months of negative cash flow.

Figure 1: Months of negative cash flow among small Australian businesses, 2021

Source: Xero’s Crunch: Cash flow challenges facing small businesses

“The fact that cash flow improved during the pandemic, despite spikes in cash flow crunches at the start of 2020, shouldn’t be a cause for celebration,” says Joseph Lyons, Xero Managing Director for Australia and Asia.

He points out that while government support schemes such as JobKeeper and JobSaver helped buoy cash flow back to pre-pandemic levels, improvements stemmed from businesses slashing expenses – often because they were forced to reduce trading hours.

“Cash flow doesn’t give a full picture of small business health, but it does offer a strong indicator of how much pressure small businesses are facing. And we’ve seen little to no lasting improvement for Australian small businesses even post-pandemic,” says Lyons.

Months of negative cash flow can create serious challenges for small businesses, especially those with limited access to credit, adds Xero Chief Customer Officer Rachael Powell.

“It can lead to mounting expenses, unpaid wages, lost jobs and owners dipping into personal savings and equity to keep their company afloat. If cash flow crunches become a chronic and repeated occurrence, the business will ultimately fail.”

Turning cautious

Small businesses are already trading cautiously. Their average payment defaults were up 18% annually in June, according to credit reporting agency CreditorWatch. Its data shows that average default rates are rising among small businesses.

“We continue to see a disturbing rise in trade payment defaults, our leading indicator for future business insolvencies,” says CreditorWatch CEO Patrick Coghlan. “Court actions are also back to pre-COVID levels.”

CreditorWatch Chief Economist Anneke Thompson believes companies will be increasingly wary of credit customers and their ability to pay going forward.

“Businesses in the growth phase, [which] require equity or debt for growth, may now see these lines of funding get increasingly more difficult to source,” she says.

Conditions still robust but confidence falls

Still, NAB’s recent survey shows that business conditions in general remain strong despite a fall in confidence.

“Conditions strengthened in Q2 [2022] as the disruptions related to the virus receded,” says NAB Group Chief Economist Alan Oster. “Trading, profitability and employment were all higher with conditions approaching the high levels seen in early 2021.”

Forward-looking indicators also look good. “Businesses have high expectations for employment over the coming year, indicating that labour demand remains very strong, and capex expectations also remain elevated.”

Getting help

For small businesses, cash flow doesn’t have to be a persistent problem. By working with a trusted lender, they can better manage their finances and access funding to help them beat cash flow crunches.

July, 2022

Refinancing is booming, but who is winning?

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Borrowers are rushing to refinance their home loans as the reality of rising interest rates kicks in. With major banks passing on the Reserve Bank’s recent rate rises in full, smaller providers are becoming customers’ lenders of choice.

According to a recent Finder survey, 18% of participating mortgage holders refinanced their home loans in the past six months. Another 18% are planning to do the same in the next six months.

“Households are in a very precarious position right now, struggling with the worst cost-of-living crisis in decades,” says Sarah Megginson, Head of Editorial at Finder. “For some, it’s a case of refinance or default on their debt.”

Total refinanced loans already hit a record high of $19 billion in May, when the Reserve Bank lifted the cash rate for the first time in almost 12 years. According to Finder’s analysis, this represented an increase of 20% over the year.

Figure 1: Volume of refinances across Australia via PEXA’s platform

Source: PEXA Refinance Index, July 2022

Recent data from online property exchange PEXA confirms that refinancing is booming. In early July, the number of refinancing deals lodged through its platform rose by 16% over the year – and by nearly 29% over the quarter.

Queensland had the highest increase out of all the states, with a year-on-year increase of 34% and a quarterly growth of 26%.

Banks lose out to smaller lenders

As borrowers hunt for lower rates, they are increasingly turning away from the major banks and towards smaller lenders, according to PEXA Head of Research Michael Gill. This is especially noticeable in the major markets of New South Wales and Victoria.

“If you look back to the start of the pandemic, the major banks were quite successful in winning more refinancing,” says Gill. “Obviously, those fixed rates motivated many borrowers to move across.”

Data from comparison site Mozo shows that the big four banks’ one-year fixed rate now averages 4.80% per annum, higher than the 4.71% among all the lenders tracked by Mozo. For a five-year term, the big four’s average is 6.34% per annum compared to Mozo’s 6.09% average for all lenders.

For comparison, the one-year fixed rate of lenders in Mozo’s database averaged 2.60% in March 2022, and their rate for a five-year term averaged 3.83%.

“Fixed rates are basically out of the market now,” says Mozo banking expert Peter Marshall. “The big banks are certainly not trying to attract customers with their fixed rates, so they’re looking at what they can do to get people in the door and give them their loans.”

Mozo consumer advocate Tom Godfrey believes mortgage holders can save tens of thousands by shopping around and switching to lenders with better deals.

“Given the savings on offer, it’s hardly surprising we’re seeing a shift to challenger lenders [and] away from the big four banks.”

An opportunity for brokers

Mortgage brokers have an important role to play in this fast-changing market. With their knowledge of mortgage products, they can help clients make the right decision when switching to another lender or home loan.

“Some people may be unaware that they are on a standard variable rate, which will fluctuate more if not properly looked at or managed,” says Joseph Daoud, Co-founder of broker Simple Finance. “They should look at their statements and see how much their rate has increased and look to refinance from this position.

“It’s best to get in touch with expert brokers to help them evaluate their best choices.”

June, 2022

Time to Worry About Rising Interest Rates and High Household Debt?

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Is trouble brewing for heavily indebted households as interest rates rise?

The Reserve Bank of Australia has lifted the cash rate twice in the past two months, rapidly taking it to 0.85% from a low of 0.10%. This has ended the era of super cheap home loans as banks pass on the RBA’s interest rate rises to borrowers in full.

And with the central bank likely to raise the cash rate again to curb inflation, mortgage holders are in for more interest rate pain.

Figure 1: Australian household debt as a percentage of GDP

Source: Bank of International Settlements

The debt connection

Australia has one of the highest levels of overall household debt in the world, with recent data from the Bank of International Settlements showing it is equivalent to 119% of GDP.

AMP Chief Economist Shane Oliver explains what this means in absolute terms. “In 1990, there was on average $69 of household debt for every $100 of average household income after tax. Today, it’s $187 of debt for every $100 of after-tax income.”

With most of that debt linked to mortgages, households are sensitive to increases in home loan interest rates.

According to comparison site Finder, June’s 0.5 percentage point hike alone would add $159 to monthly repayments on a $600,000 mortgage with a 3% home loan rate. That’s nearly $2,000 a year.

“We have a big potential problem courtesy of the way we have run our housing system for not just the last decade but for the last at least three decades,” says Chris Martin, a Senior Research Fellow at the University of New South Wales’ City Futures Research Centre, referring to policies that have encouraged Australians to get into debt.

In what he calls a “double whammy for indebted households”, Tim Lawless at CoreLogic notes how the added cost of loans comes as prices of non-discretionary goods rise more than twice those of discretionary items.

“Higher costs for food, fuel and finance are likely to see household savings continue to taper as families funnel more of their income towards servicing their mortgage and funding essential costs of living,” says Lawless.

Not a major problem

Oliver acknowledges that the combination of rising rates and high household debt is an issue. But he believes it’s not as bad as it looks.

“First, the rise in debt partly reflected a rational adjustment to lower rates and greater credit availability since the 1980s,” he says. “Second, household debt has been trending up since credit was invented.”

In other words, it was natural for household debt to have soared to where it is now.

Australians have also created more wealth than they have accumulated debt, thanks to a surge in home values and financial holdings, particularly post-pandemic. This gives them a buffer against the rising interest rates.

“So while average household debt for each Australian has risen from $11,779 in 1990 to $107,318 now, average wealth per person has surged from $87,489 to $655,894.”

Oliver adds that most Australians are still servicing their loans diligently, as banks’ low levels of non-performing loans suggest. It’s also higher-income households that hold more debt, which means that they have better capacity to pay back their loans.

“Finally, lending standards did not deteriorate to the same degree in Australia as they did in the US prior to the global financial crisis,” says Oliver.

“The key is that the RBA only needs to raise interest rates far enough to cool demand to take pressure off inflation and keep inflation expectations down.”

May, 2022

What Now for the Housing Market?

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The housing market has lost steam after two years of breakneck growth. Dwelling values in select suburbs had already dropped by as much as $200,000 in the three months to April, as interest rates begin to rise along with the cost of living.

For small business owners looking to borrow using their home equity, this might be a good time to work with a mortgage broker to get a better interest rate.

The PropTrack Home Price Index shows national housing prices grew 0.13% in April. This was the slowest monthly increase since May 2020, with Sydney and Hobart recording their first monthly declines since the start of the pandemic housing boom.

The housing market grew 16% in the year to April, about the same rate as a year ago.

Figure 1: Australian housing market annual growth, April 2022

Source: PropTrack Home Price Index, April 2022

Figure 2: Price growth of houses and units

Source: PropTrack Home Price Index, April 2022

The slowdown is not surprising, according to PropTrack Economist Angus Moore, adding that housing market growth has lost its momentum.

“Prices were up 35% since the pandemic began, and we were never going to maintain that growth.”

Pricey suburbs lead price falls

Another report reveals that expensive inner-city suburbs are leading the broader decline in prices. Housing values in Sydney’s Beaconsfield fell 8.5% or $168,000 in the three months to April. In Darlinghurst, they dropped more than $206,000 or 8.3%.

Declines are more modest in Melbourne suburbs. In Park Orchards, prices fell 7.1% and in Balaclava 5.1%.

“Higher income households tend to hold more housing debt to income, so do property investors,” says CoreLogic Head of Research Eliza Owen.

“That’s why the high end of the market can often be more sensitive to changes in interest rates or credit conditions, but this can also affect some other popular investment markets like inner-city areas.”

Further declines likely

The April slowdown came just before the Reserve Bank of Australia lifted the official interest rate for the first time in more than 10 years.

This suggests that further price falls are likely as expected rate hikes make it difficult for some borrowers to meet mortgage repayments.

Based on its May 2022 survey of property analysts, Reuters expects Australian housing market growth to slow to just 1% this year. This is down sharply on the 6.7% it forecast after its February 2022 poll.

However, it predicts prices to drop 8% next year, more than the 5% forecast after its February survey.

“A steep increase in mortgage rates over the coming year will weigh heavily on house prices,” says ANZ Senior Economist Adelaide Timbrell, one of Reuters’ respondents.

Westpac also expects dwelling values to drop 8% in 2023, but it expects them to fall at a higher rate of 2% this year. The bank based its forecasts on an expectation that the official interest rate would rise to a peak of 2.25% by May 2023, up from 0.35% now.

Market conditions have already turned, according to Westpac Senior Economist Matthew Hassan.

“Sales are down sharply from last year’s extreme highs, buyer sentiment is plumbing new cycle lows and house price expectations are being pared back quickly,” says Hassan.

But Housing Industry Association Chief Economist Tim Reardon doesn’t expect price falls to be as substantial as some observers predict.

“As interest rates increase, the high growth cycle will stall and we’ll enter a different cycle where prices will decline,” he says. “But it’s difficult to see house prices falling significantly while we still have a shortage of supply.”

March, 2022

Housing Investors Are Back in the Driver’s Seat

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After a few years of being largely on the sidelines, housing investors are very much back. They’re borrowing more money than ever, driving a rise in lending even as mortgage rates are poised to rise.

According to latest data from the Australian Bureau of Statistics (ABS), new investor loan commitments for housing rose 6.1% in January 2022 compared to the previous month – and a staggering 67.8% year on year. In contrast, lending to owner-occupiers climbed 1% in January compared to the previous month.

“The value of new loan commitments for investor housing has grown for 15 consecutive months, consistent with the strong housing market and growth in house prices,” says ABS Head of Finance and Wealth Katherine Keenan.

Borrowers in the Australian Capital Territory (up 22.8% over the previous month), Victoria (up 11.1%) and New South Wales (up 9.8%) drove the rise in investor loans.

Figure 1: New housing loan commitments as of January 2022

Source: Australian Bureau of Statistics, Lending indicators, January 2022

Owner-occupier lending still larger

Revival in investor lending comes after a period of subdued activity caused by a regulatory crackdown on high-risk lending.

In 2017, the Australian Prudential Regulation Authority introduced a 30% cap on lenders’ share of new interest-only home loans to try to cool down the overheating property market. It eventually scrapped this limit, following its move to drop an earlier restriction capping lenders’ investor loan growth at 10%.

But even with the rising investor loan commitments, new lending to this cohort represented only a third – or $11 billion – of the total in January 2022. New housing loans for owner-occupiers accounted for $22.7 billion.

Figure 2: New housing loan commitments by purpose

Source: Australian Bureau of Statistics, Lending indicators, January 2022

“This reflects the rapid growth of owner-occupier commitments over the past 18 months,” says Keenan.

However, data suggests that this trend might be starting to slow.

The number of new loan commitments to owner-occupier first home buyers dropped 6.9% in January 2022 compared to the previous month. It fell across all markets except the Australian Capital Territory, where the figure rose more than 25% during the month.

Brokers settling more loans

The comeback in investor activity promises another area of opportunity for mortgage brokers after a period of robust growth for the channel.

According to the Mortgage & Finance Association of Australia (MFAA), brokers settled $95.7 billion worth of home loans in the December 2021 quarter – the highest quarterly figure ever reported.

This represents a nearly 50% jump from a year ago, when mortgage brokers settled a record $64.1 billion in home financing.

Writing two of every three home loans, mortgage brokers facilitated 66.5% of all new housing credit during the quarter. This was the highest ever recorded for a December quarter and was up 7.1 percentage points compared to a year ago.

A vote of trust

For MFAA Chief Executive Officer Mike Felton, the results reflect a continued vote of consumer confidence in the service mortgage brokers provide – and the choice they bring to the home loan market.

“To have our industry grow almost 50% year on year in terms of the volume of loans settled is a phenomenal result, and sends a powerful message as to the state of our industry following the significant changes made,” says Felton.

“The combination of reforms implemented – alongside brokers’ dedication to their customers – continues to produce strong consumer outcomes, driving trust and confidence and reinforcing that mortgage broking is a force for good that supports competition and choice that is critical to the Australian economy.”