FHBs flock to market in December

The Australian Bureau of Statistics (ABS) has released its Lending Indicators data for December 2019, reporting a 6.2 per cent (seasonally adjusted) rise in the number of home loan commitments from first home buyers (FHBs). 

Strong FHB demand in December also resulted in a 3.6 per cent rise in the number of first home owner lending commitments in the quarter ending December 2019.

Of the 9,606 new FHB lending commitments in the month, a total of 5.4 per cent were for the purposes of investment, with the percentage of FHB investors remaining steady month-on-month.

Additionally, owner-occupier FHBs made up 30.2 per cent of all owner-occupier loan commitments in December, increasing from 29.7 per cent in November.

When compared with the previous corresponding period, the total number of FHB approvals rose 21.3 per cent. 

The value of lending commitments to FHBs also increased over the period, up 38 per cent on December 2018.  

CoreLogic head of research Eliza Owen attributed the increase in the value of FHB commitments to rising home prices and increased borrowing capacity.

According to Ms Owen, investors being welcomed back to the market following the removal of the 30 per cent interest-only cap on investment lending by APRA triggered the rebound in property prices.

Ms Owen also pointed to the RBA’s three cuts to the official cash rate throughout 2019, which saw “cheaper mortgage rates and potentially higher borrowing capacity”, followed on by changes to serviceability requirements, which also contributed to borrowers accessing an increased loan capacity.

However, Ms Owen highlighted that as housing affordability deteriorates, and the value of housing outpaces incomes, it’s “unlikely such a rapid rate of growth in both housing finance and housing values can be sustained”.

HIA economist Angela Lillicrap said the influx of FHBs to the market in December is indicative of “cyclical changes” in the housing market and will likely become subdued as owner-occupiers and investors return to the market, inflating prices.

She concluded: “Structural changes to the regulation of banks mean that it is increasingly difficult for first home buyers to gain access to finance. There is a risk that this will have an adverse impact on home-ownership rates.”

[Related: Mortgage demand spikes, investor demand turns positive]

Hannah Dowling is a journalist for mortgage business, the leading source of news, opinion and strategy for professionals working in the mortgage industry.

Prior to joining the team at Mortgage Business, Hannah worked as a content producer for a podcast catering to property investors. She also spent 6 years working in the real estate sector at a local agency. 

Hannah graduated from Macquarie University with a Bachelor of Media and Journalism. 

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