The latest Housing Finance data from the Australian Bureau of Statistics (ABS) has revealed that in seasonally adjusted terms, home loan approvals increased by 2.6 per cent in October, triggered by a 3.5 per cent rise in owner-occupied approvals and a 0.5 per cent increase in investor lending.  

The October spike in approvals follows months of declines in home loan commitments, off the back of tighter credit conditions and falling property prices.

However, according to senior economist at ANZ Research Daniel Gradwell, the October rise is set to be short-lived.

“The slight improvement in the investor space is noteworthy, simply because it is the first rise for some time,” Mr Gradwell said.

“Although a solid monthly result, the prospect of further credit tightening is likely to continue to weigh on the housing market and finance approvals from here.”

Research director at RateCity.com.au Sally Tindall agrees, stating that the October spike was likely to be an “anomaly”.  

“Over the last 12 months, the banks have been tightening the screws on home lending. [The] results appear to be a blip in a sustained downward trend for the housing finance market,” Ms Tindall said.

Further, the ABS data revealed that the proportion of dwelling commitments from first home buyers (FHBs) also increased, from 18 per cent to 18.1 per cent, with Mr Gradwell observing that in dollar terms, FHB loans made up 13.4 per cent of the overall value of mortgage commitments, which he said was the largest share since 2012.

“The absolute number of first home buyers is still well below the stimulus-induced peak of 2009-10, but appears to be settling around solid levels,” the ANZ economist said.

“The stamp duty discounts on offer across New South Wales and Victoria, as well as the declining prices and improved affordability, appear to be improving home ownership rates.”

The ABS also reported that the share of home loan approvals settled with fixed rates increased, rising from 14.6 per cent of total commitments in September, to 16.3 per cent of approvals in October.  

Ms Tindall noted that the rise in fixed rate demand reflected moves by lenders to reduce pricing on fixed rate home loan offerings to lure business from borrowers.

“This result came at the same time banks were throwing everything at fixed rates in an effort to keep customers coming through the door,” she said.

However, the research director added that fixed rates may become less attractive to borrowers, with the Reserve Bank of Australia admitting that a cut to the official cash rate is possible.  

She concluded: “While some customers will be re-examining the merits of fixed rates on the back of these comments, with rates at near-historic lows for owner occupiers, fixed rates can still be competitive, if you like the security a fixed rate brings.”