First home buyers came back for Christmas as the average mortgage heads to $500,000

Brighton beach bathing boxes, Melbourne.Bathing boxes at Brighton beach, Melbourne. Photo: AdobeStock

Australians started borrowing again before Christmas, with the value of new home loans up by 4.4% in December (seasonally adjusted), while personal fixed term loans rose by 3.5% according to data released today by the Australian Bureau of Statistics.

The value of mortgages to owner-occupier rose by 5.1%, an eight-year high, and 17.9% over the year, while investor loans were up 2.8% and 4.9% for the 12 months.

The average new mortgage increased to a record $497,900.

“The number of owner occupier first home buyer loan commitments rose 6.2% in seasonally adjusted terms; the number of first home buyer loan commitments for investment purposes accounted for 5.4% of all first home buyer commitments, in original terms; owner occupier first home buyer loan commitments accounted for 30.2 per cent of all owner occupier commitments (excluding refinancing), in original terms,” the ABS said.

The number of owner-occupier construction loans was also up by 5.1% (and 5.6% by value) while the number of mortgages for newly-erected dwellings rose 5.6% (value up 5%); loans for purchase of existing dwellings rose by 2.9% (value up 5.4%).

The ACT (up 10%) and Northern Territory (up 8.8%) led the way in a state-by-state breakdown for December, followed by Victoria (7.5%), Queensland (5.9%), NSW (3.9%), Western Australia (3.8%), and South Australia (2.4%). Only Tasmania saw a decline, down 1%.

CommSec Chief Economist Craig James said that the average new home loan has lifted by around $60,000 or 16% since last May’s federal election.

“Rate cuts and increased buyers enthusiasm for property have driven the gains. But with wages growing at a 2.2-2.3% annual pace, affordability constraints may soon temper the optimism,” he said.

“The home loan market is motoring. More loans are being taken out by investors and those wanting to buy homes to live in. The share of first-home buyers is at eight-year highs while the number of first-home borrowers is at decade highs.”

James said the upward pressure on house prices will keep the Reserve Bank “on the interest rate sidelines” as a result, adding that the lift in home loans is good news for housing and homewares-dependent retailers.

“The lift in the average mortgage can reflect a range of factors such as higher home prices, activity at both the upper and lower end of the market and household incomes and savings. The lift in mortgage size will deter the Reserve Bank from cutting rates again,” he said.

Weekend home auction figures reflected an increased optimism with 428 auctions held in Sydney with a preliminary clearance rate of 79.9%; the highest of all the capital and well ahead of the 54% clearance rate 12 months ago on 322 properties. Melbourne saw 401 properties go under the hammer last week with a preliminary clearance rate of 74%. Canberra’s figure was 77.8%, Brisbane’s the lowest with 36.4% of homes sold at auction.

Personal lending grows

Meanwhile, when it comes to personal finance, the ABS figures reveal a shift away from revolving sources of credit, such as credit cards, which fell by 8.55 in December after a 4.3% rise in November, with the figure down 6.2% over the year. However, fixed term personal loan commitments increased by 3.5% in December to end the 12 months up 7.9%.

The release of the ABS figures coincided with the weekly ANZ-Roy Morgan consumer confidence rating, which posted a fall of 0.6% to 107.8. Sentiment remains below both the average of 114.1 points held since 2014 and the longer term average of 113.1 points since 1990.

CommSec’s Craig James said both consumer and business confidence “are treading water” just below longer-term averages.

“Aussie consumers are confident on the outlook for their own finances (the outlook for finances is at a 17-week high). It’s just that they worry about the economy,” he said.

“Drought, bushfires, flood, coronavirus are all weighing on consciousness. The low level of the Aussie dollar also isn’t helping the consumer mood. And businesses are similarly in ‘wait and see mode’.”

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