Housing finance plunges by 11pc

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THE value of new home loans took their largest ever monthly fall in May, plummeting 11.6% to $16.42 billion according to the Australian Bureau of Statistics.

Investor loans dropped 15.6% to $4.1 billion, seasonally adjusted, while owner occupier loans took a 10.2% hit to $12.31 billion.

Annual figures show investor loans are 11.9% lower than the same time last year, while the owner occupier segment is 7.3% higher. Home loans by value are up 1.8%.

ABS chief economist, Bruce Hockman said this was the largest monthly fall in home loans in the history of the series, driven by strong falls in the value of loan commitments for housing in New South Wales and Victoria.

“While reduced transactions in the housing market stifled new loan activity in May, the value of existing owner occupier loans refinanced with a different bank was by far the highest on record as borrowers responded to reduced interest rates and refinancing offers.”

Home loan refinancing surged by about 27%.

Low stock levels and government stimulus measures have safeguarded house prices from heavy declines during the pandemic so far, but the longer term outlook remains highly uncertain as immigration level and spending dry up, and unemployment grows.

Falls were seen in the owner occupier category for loans for the construction of dwellings (by 2.2%), the purchase of newly erected dwellings (4.1%) and purchase of existing dwellings (12.4%). By number, the respective segments dropped 3.2%, 3.8% and 9.1%.

First home buyer loans were down 10.5%, to $3.71 billion, while the number of loans dropped 9.3%.

At the start of this month, the federal government opened 10,000 new spots for the First Home Buyer Deposit Scheme, that allows first home buyers to put down a deposit of just 5% with the government the guarantor of the 15% balance.

The AFG Index for the June quarter recorded its largest quarterly lodgement result at almost $17 billion, representing a 30% increase over the same time last year with first home buyers lifting their share from 12% in April to 21% in June, and upgraders from 36% to 42% over the same period. Customers refinancing fell from 38% to 23%.

This week, the Australian Banking Association said it would extend the home loans holiday to avert a potential mortgage default risk in September when JobKeeper and the six-month loan repayment deferral period expires.

A potential default figure of up to $75 billion has been mooted by Mozo. Almost half of Aussies say they will struggle to meet their home loan repayments after their JobKeeper payments and the bank’s COVID-19 hardship holiday ends, according to its survey.

Treasurer Josh Frydenberg has flagged an announcement regarding stimulus measures for 23rd July.

Official data showed the value of loans to businesses for construction rose 3.6% to $1.97 billion in May, but is 26.0% lower annually, and dropped 2.0% for the purchase of property in May to $4.26 billion, now 35.4% lower than 12 months earlier.

Personal loans increased 14.5%, now down 10.8% year on year.

“The rise in the value of new loan commitments for fixed term personal finance was driven by a partial rebound in the value of new loan commitments for road vehicles”, Mr Hockman said.