Like House Prices, Home Loans Are At Record Levels
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Like House Prices, Home Loans Are At Record Levels

The increase in loans has led to the fastest price gains in three decades.

By Terry Christodoulou
Wed, Feb 2, 2022 11:34amGrey Clock < 1 min

Last year, Australian’s borrowed a record near-$270 billion in new home loans last year as they took advantage of record-low borrowing costs resulting in property prices rising at the fastest rate in more than three decades.

New mortgage commitments over the 12 months to December jumped 51% from the 2020 calendar year — gaining 4.4% in December alone for a monthly record of $32.8 billion— according to official figures.

This total was driven by a 5.3% month-on-month rise in owner-occupier and first home buyer loans and a 2.4% gain in investor mortgage borrowing, which underpinned the capital city average growth over the year of 21% — the biggest annual gain since 1998.

Separate figures from data researchers CoreLogic indicates a curb in price growth in January, with house prices up 1.1% in January, with the longer-term trend showing a weakening in growth across the capitals

Brisbane and Adelaide led the charge, up 2.3% and 2.2% respectively while Hobart and Canberra gained more than 1% each.

Sydney and Perth were also up 0.6% each, Darwin was up 0.5% and Melbourne up 2%.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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