Mortgage demand tumbles as market turns

The figures show that the value of total dwelling approvals fell by 3.6 per cent over September, while the number of dwelling commitments for owner-occupier loans fell by 2.3 per cent. Investor loan approvals plunged by 6.3 percent as APRA’s lending curbs work their way through the system.

“Overall, the update brings the finance approval data more in line with the clear slowing signal already evident from turnover, auction markets and prices,” a Westpac report noted.

“For investors, a further pullback is likely in the months ahead depending on the extent to which loan activity has been supported by refinancing.”

Mortgage Choice CEO John Flavell wasn’t surprised by the new figures and said that a 2.3 per cent drop in home loan demand was largely expected.

He said: “The fact is, interest rates have now been sitting at historically low levels for over 12 months.

“When interest rates first started to fall, we saw a spike in the number of borrowers looking to get into the market and take advantage of the low rate environment.

“But given that rates have been so low for so long, it is only natural that we would eventually see a slight reduction in the level of home loan demand.”

Mr Flavell stressed that despite the sharp reduction, demand for home loans is still high “by long-term standards”, and he emphasised that “the market certainly hasn’t collapsed”, before referring to figures which report that more than 55,000 home loans were approved in the last three months.

ANZ reacted to the ABS data by drawing a link between tightened lending conditions and the demand reduction.

“APRA’s macro-prudential policy, aimed at investors and interest-only loans, in particular, appears to be having the desired effect of taking some investor demand out of the market,” the ANZ report noted.

Earlier this year, the Australian Prudential Regulation Authority (APRA) implemented changes to “reinforce solid residential mortgage lending” in what it dubbed an “environment of heightened risks”.

Housing construction also fell by 2.6 per cent in the month of September.

[Related: Westpac still dominating investor lending market]

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

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