2019 outlook for mortgages softened by fresh figures

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February 13 2019
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Fresh data shows the value of total home loan commitments fell by 4.4 per cent over the month in December, but what’s the market looking like in 2019?

According to new Lending to Households and Businesses data from the Australian Bureau of Statistics (ABS), the total value of loan commitments to households dropped by 4.4 per cent, when seasonally adjusted, to $32.03 billion in December last year, compared to the 2.4 per cent fall recorded in November.

The main drivers of the overall decline were substantial falls in the value of lending for owner-occupied dwellings and investment dwellings, which decreased by 6.4 per cent to $12.5 billion and by 4.6 per cent to $4.89 billion, respectively, according to ABS chief economist Bruce Hockman.

“The slowdown in lending for investor dwellings this month continues the steady decline over the past two years, with the value of new investor loan commitments down around 40 per cent from the peak at the start of 2017,” the chief economist said.

“The slowdown in lending for owner-occupier dwellings is more recent, with falls concentrated in the last half of 2018.”

The total number of owner-occupied housing commitments (excluding refinancing) went down by 8.2 per cent in December to 32,102, in seasonally adjusted terms, while the number of commitments for first home buyers (owner-occupied) dropped by 9.6 percent to 8,476 the same month.

“While the fall in lending to first home buyers over the past year reflects the broader trend of weaker lending activity, the fall is smaller than the fall in lending to owner-occupier non-first home buyers (-15.5 per cent) and follows strong growth in 2017,” the ABS stated.

Further, total commitments for the construction of dwellings slipped by 2.4 percent to 5,428 in December, while the number of commitments for the purchase of new dwellings slid by 5.5 per cent to 2,431, when seasonally adjusted. The number of commitments for the purchase of established dwellings in the same month similarly fell by 9.7 per cent to 24,242.

On a state-by-state basis, the value of lending for owner-occupied dwellings (excluding refinancing) decreased in NSW (-6.1 per cent), Victoria (-6.6 per cent), Queensland (-9.9 per cent), Western Australia (-6.3 per cent), the ACT (-4.9 per cent), the Northern Territory (-18.3 per cent) and South Australia (-1.0 per cent). Tasmania (+4.2 per cent) was the only state to record an increase in December.

The 2019 outlook

The regulator lifting its cap on interest-only loans has mortgage brokers confident in a more competitive 2019 market, after a year that saw big rate hikes in investor loans.

2019 will likely see more flexibility for investors too, according to broker and managing director of Sydney-based Atelier Wealth Aaron Christie-David.

“The positive impact will be the ability for existing interest-only mortgagors, specifically investors, to refinance to another interest-only loan,” he said.

Mortgage broker and owner of Pink Finance, Nicole Cannon, is similarly bullish about the choice and flexibility of the finance market in 2019, given the regulator has eased its conditions.

“This enables us to have more conversations with clients about the choices that they’ve got, and the options for them with their properties,” Ms Cannon said.

“The cap restricted how many lenders we could use, and some priced investment lending so that it’s not competitive. In some cases, it’s almost just as cheap to do principal and interest as it is to do interest-only,” she added.

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