Mortgage demand dips in May

New home loan values fell 1.7 per cent in May to $28.8 billion according to the latest Lending Indicators data released by the Australian Bureau of Statistics (ABS).

This followed a rise in April of 4.8 per cent, when the total value of new loan commitments hit $29.4 billion.

New lending to investors continued to outperform owner-occupier lending during the month, with investor loans down by 1.3 per cent to $10.7 billion, while owner-occupier loans (excluding first home buyers) fell 1.6 per cent to $12.9 billion.

Meanwhile, the value of new mortgages to first home buyers fell by 2.9 per cent to $5.2 billion.

ABS head of finance statistics Fiona Cotsell said while declines were observed in all types of buyers during the month, the value of new loan commitments still rose 18 per cent over the past year.

Additionally, investor loans across most states and territories have trended upwards since this time in 2023, with the largest increases being seen in NSW (24.8 per cent), Queensland (48.2 per cent), and Western Australia (73.9 per cent).

“In May, the value of new loans to investors in Queensland reached an all-time high of $2.4 billion, exceeding Victoria for the third consecutive month,” Cotsell said.

“This is mainly due to investors taking out larger loans in the Sunshine State compared to this time last year. We saw the average loan size for investors in Queensland increase by 14.3 per cent since May 2023, from $508,000 to $580,000.

“Comparatively, the average loan size in Victoria fell 3.2 per cent over the same period, from $584,000 to $566,000.”

Reacting to the data, managing director of Capspace, Tim Keith, said investors have been left vulnerable due to any potential increases in interest rates should inflation remain above the Reserve Bank of Australia’s (RBA) target band.

“Investor demand for housing has eased in May due to higher interest rates, though strong growth over the past year has added to upward pressure on property prices,” he said.

“Ongoing population growth will put further pressure on house prices and rents nationally in the coming year, keeping upward pressure on the size of household [mortgage] sizes, as well as inflation and potentially official interest rates.

“We believe that with the employment market remaining tight, and with no immediate signs of inflation falling below 3 per cent, the RBA is likely to keep interest rates on hold at its August meeting and in the months to come or it could raise them again if inflation needs further taming.”

[RELATED: New mortgage values up almost 25% YOY]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.