Investors soften drop in new lending

By Gerv Tacadena

Overall refinancing activity also declined over the month.

Investors managed to alleviate the decline in overall home lending in September.

Figures from the Australian Bureau of Statistics (ABS) show that new lending, excluding refinancing, declined for a second month in a row, down by 1.4%.

This followed the 4.3% monthly fall recorded in August.

Investor lending rose by 1.4% over the month while loans for owner-occupiers declined by 2.7%.

September marked the fourth consecutive monthly decline for owner-occupiers.

Still, the level of overall home lending remained high, up by 35.5% from last year.

Busiest markets for lending

The value of total new mortgage lending to owner-occupiers and investors rose in most states and territories except in three where it dropped.

Northern Territory recorded the biggest decline of 25%, followed by Victoria at 8.8%, and Tasmania at 0.3%.

On the other hand, Queensland reported an all-time high, reporting a 4.2% gain.

Interestingly, the gain in Queensland can be attributed to investors, as owner-occupier lending in the state fell over the month.

REA Group executive manager for economic research Cameron Kusher said investor lending rose in every state and territory save for the Northern Territory, with the value of loans for the segment hitting historic highs in Queensland, Tasmania, and the ACT.

"The recent strength in investor lending clearly highlights that interest in the market has returned and it is continuing to strengthen each month," he said.

Drop in refinancing activity

The ABS data showed a significant decline in refinancing activity, which hit a 9.1% drop after rising for five straight months.

The 9.6% fall in the owner-occupier segment contributed more than half of the overall decline in total external refinancing.

Meanwhile, investor refinancing also fell during the month, down by 8.4%.

Outlook for lending

Mr Kusher said the emergence of New South Wales, Victoria, and the ACT from lockdowns will influence where lending activity will go in the coming months.

"International travel is also restarting which, along with re-opening of cities, means that people will have more options in how they spend their money," he said.

However, he noted of the recent changes to serviceability rules, which raised the mortgage assessment buffer from 2.5 percentage points to 3 percentage points.

"The impact of this is that borrowing capacities will be reduced and some people who were marginal borrowers previously may now find it difficult to refinance their mortgage," he said.

Still, Mr Kusher said demand remains high from Australians looking to purchase a home.

"We expect this heightened demand to continue over the coming months although it seems likely there will be some easing of demand given the re-opening of the economy along with domestic and international borders," he said.

Photo by Andrew Neel on Unsplash.

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