Inquisitive questions on spending habits remain the hurdle in your home loan application

Inquisitive questions on spending habits remain the hurdle in your home loan application
Jonathan ChancellorDecember 7, 2020

Sydney households have been taking advantage of those two recent consecutive interest rate cuts to secure finance for home loans.

The number of new loans approved in July surged 3.9% nationally, stronger than anyone expected.

Approvals are still down year on year, but the rise to $32 billion in lending was the sharpest increase in four-and-a-half years, according to the the Australian Bureau of Statistics (ABS).

The rise in new lending to households in July followed a 1.9% rise in June.

NSW led the gains, up by 5.4%.

The average 4.9% standard variable home rate is the lowest ever recorded by the Reserve Bank whose records date back to 1960.

After rate cuts in June and July by the RBA, the ABS confirmed a notable rise in borrowing among owner occupiers, first home buyers, and to a lesser extent investors.

First home buyers continued their steady return to the market, increasing their share of new owner-occupier lending to around 30%.

It was the highest proportion of first home buyers since early 2012.

The lending data over the next few months will provide insights on the strength of the property cycle upturn, but it does appear that the prospect of a Labor government was weighing heavily on market sentiment.

The APRA loosening in lending criteria is now in effect too enabling more borrowing power.

While the credit curbs have eased, be aware that the inquisitive questions on your spending habits remain the hurdle in your home loan applications. 

The emerging property market turnaround appears likely to cushion the extent and length of the downturn of the highly cyclical residential sector.

Although there remains uncertainty about just how the recovery will run, especially should late spring stock levels return to the market in a rush.

Currently, early spring auction volumes remain low at around 20% down in Sydney on the same weekend last September.

The auction and lending bounce is very much about buying established houses, rather than new apartments.

The latest ABS data indicated approvals to fund new construction was still in decline, some 15% lower year-on-year. 

There was also a decline in lending to businesses.

We don't need a dramatic spurt in property prices, but greater confidence would be good.

I have often written about all those tradies in high visibility vests across the suburbs. They are what's underpinning NSW's economic progress.

Many of these tradies have been building new homes in high-rise projects and new house and land estates, and many of them have then had the confidence to purchase their own homes.

The decreased apartment construction trend over the last two years will be tricky to turnaround. 

New South Wales continues to see a decline in the number of private sector building approvals.

New dwelling investment is always volatile and closely linked with retail spending on household goods.

By their own admission, it is hard for the RBA to track the high-rise apartment impact in their policy decisions.

The "longer and lumpier construction timelines for apartments" mean the full impact of policy changes may take many years to be realised, the RBA has previously acknowledged.

Ofcourse the apartment defects scandal has been the curveball on buyer willingness.

It has has impacted confidence from the dodgiest builder right through to the publicly listed Mirvac and Frasers Property.

This article first appeared in The Daily Telegraph. 

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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