Home loans reach 7 month high

Monday November 23, 2009

Home loan applications have reached record highs for a seven month period as Australians rushed out to take advantage of the Federal Government's First Home Owners Grant before the amount was reduced on September 30th 2009.

The Australian Bureau of Statistics has released figures showing that September 2009 had a 5.1 per cent increase in the number of home loans from an increase of 4 per cent in August. The closest rise to this was recorded in March 2009 with 5.3 per cent. Australian Bureau of Statistics and market analysis had predicted a rise in the figure, but of a far more subdued 3 per cent rise in the monthly figure, with many analysts now using this unexpected figure as an indicator of future trends.

"It's obviously above what the market was expecting," stated Harley Dale, Housing Industry Association chief economist

"You've got further growth and an indicator of how much new home building there will be six months down the track," he said.

September was viewed as an ideal time to enter the housing market for many first home buyers with the approaching deadline of the Federal Government's First Home Owners Grant along with low interest rates and a recovering economy. The First Home Owners Grant has now been reduced and will remain at this lower amount until December 31st 2009.

The results showed that first home buyers had increased their number of home loans from the banks and similar loaning agencies from 24.7 per cent in August to 26.1 per cent in September.

Australian Bureau of Statistics figures:

• average loan size for first-home buyers rose $3800 to $274,600 in September
• average loan size for all owner-occupied housing rose $2900 to $269,500
• home prices rose 4.2 per cent in the third quarter
• Lending to owner-occupiers for the construction of new dwellings rose 8 per cent in September (this is the highest level since December 1994) after climbing 4 per cent in August

TD Securities' Annette Beacher told the Sydney Morning Herald that following 3 per cent fall in August that "Established house approvals rose substantially, by 5 per cent, suggesting some underlying strength in housing demand,"

"The Reserve Bank already expects demand to cool post fiscal stimulus, hence a soft October will not be a surprise. And indeed it may be welcome, given the acceleration of house prices this year as demand chases short supply."

The Reserve Bank of Australia has now raised its official rate twice in consecutive months, the first time since March 2008, to a rate of 3.5 per cent. This is an increase from the 3 per cent rate, which was a49-year low for Australia's official interest rates.

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