Record Rise in New Home Lending

The value of new housing loan commitments jumped in July, recording the biggest rise in 11 years, with an 8.9 per cent uptick on the previous month.

Wednesday’s Australian Bureau of Statistics figures show new loan commitments for owner-occupier housing rose in all states and territories, except the Australian Capital Territory, with large increases seen in Western Australia, New South Wales, Victoria and Queensland.

July’s 8.9 per cent jump follows the 6.4 per cent rise in June, marking the biggest back-to-back increase in home loans in 18 years of records, CommSec chief economist Craig James says.

“Today’s economic data can be filed in the ‘encouraging’ category,” he said.

“Home loan data is healthy and average home loans are still bigger than a year ago. There are more first home buyers taking out loans than at any point over the past decade,” James said.

The value of new loan commitments for owner-occupier housing rose 10.7 per cent, while property investor loans increased 3.5 per cent.

The value of loans to first home buyers rose by 10.6 per cent in July, 26.6 per cent higher for the year.

ABS head of finance Amanda Seneviratne said the July rebound was likely a result of easing social distancing restrictions in most states and territories.

New loan commitments for owner-occupiers were recorded in Western Australia, up 17.1 per cent for July, New South Wales, up 12.1 per cent, Queensland up 11.3 per cent, with Victoria also posting an increase of 8.9 per cent.

Due to Victoria's stage four restrictions in Melbourne, BIS Oxford Economics principal economist Timothy Hibbert expects a sharp fall in new mortgage approvals across all buyer channels from August.

“While Victoria will weigh heavily on the national outlook for the remainder of 2020, further improvement in housing finance indicators is expected for the rest of Australia over the coming months,” Hibbert said.

South Australia recorded an 8.8 per cent increase in July home loans, Tasmania was up 6 per cent, Northern Territory 24.8 per cent, and ACT down 0.3 per cent.

Lift in residential building and land loans

The ABS data shows loan figures for the construction of new homes jumped 9 per cent in July, with lending for residential land purchase up by 31.5 per cent over the month.

Master Builders chief executive Denita Wawn says it's an encouraging impact of the government’s Home Builder package, but called for a 12-month extension ahead of the October 6 federal budget.

“Our latest forecasts estimate that HomeBuilder is likely to boost new home building commencements by almost 10,000 during 2020-21 but the sector still faces a forecast of 27 per cent decline,” Wawn said.

The ABS lending indicators are released monthly, with figures on new housing, personal, commercial and lease finance commitments, revealing the impact of interest rate settings, confidence and spending in the economy.

Separately, ABS also released jobs figures this week, revealing that around 932,000 jobs were lost between the March and June quarters.

Despite Australia's official recession status, the Westpac-Melbourne Institute found consumer confidence is up. The monthly consumer sentiment index surged from 79.5 in August to 93.8 in September, an increase of 18 per cent.

Westpac's Bill Evans said that the rebound means the index is now 1.6 per cent below the average over the six months prior to the emergence of Covid-19 in March.