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Goldilocks returns to home loan marketHousing finance
Number of home loans: The number of loans (commitments) for home owners (owner-occupiers) fell by 0.6 per cent in October after falling by 2.5 per cent in September.
Value of home loans: The value of new housing commitments (owner occupier and investment) rose by 0.6 per cent in October after falling by 4.7 per cent in September.
First home buyers: The proportion of first-time buyers in the home loan market rose from 17.4 per cent to a near 5-year high of 17.6 per cent in October (decade-average 17.9 per cent).
Commitments not taken up: The value of loan commitments not advanced stood at $29 billion in October, just off record highs. 
What does it all mean?
Each month, budding home buyers go to their lenders and seek pre-approval for a loan. The lenders may then give a commitment to provide the finance once the dream home is found. At present the sum of loan commitments that have been made but not advanced sits at $29 billion. Each month around $20 billion is advanced in home loans, so around 1½ months of loan commitments are waiting to find a home.
In terms of new commitments, there are more signs that the home loan market has cooled. That means fewer homes being built and fewer purchases and thus further softening of home prices. Pent-up demand has been met. The home loan market is not too hot or cold, but just about right. Now the question comes to the supplydemand equation when all the new homes are finished and hit the market.
And the supply-demand balance varies markedly across the country. While inner-city apartments are still hotly demanded in Sydney, the inner-city Brisbane apartment market is bordering on over-supply with a marked softening of the rental market.
What do the figures show?
Housing finance – number
The number of loans (commitments) for budding home owners (owner-occupiers) fell by 0.6 per cent in October after falling by 2.5 per cent in September
Excluding the refinancing of dwellings, the number of loans declined by 0.8 per cent after falling by 2.9 per cent in September.
Loans by owner-occupiers for the construction of homes fell for the third straight month, down by 1.4 per cent. Construction lending has fallen by 6.5 per cent in three months.
Loans to buy newly-erected dwellings fell by 1.6 per cent in October, but from 38-year highs.
Loans for the purchase of established dwellings (excluding refinancing) fell by 0.7 per cent in September.
The number of refinancing transactions fell by 0.1 per cent after falling by 1.4 per cent in September.
Housing finance – value
The value of new housing commitments (owner occupier and investment) rose by 0.6 per cent in October after falling by 4.7 per cent in September.
Owner-occupier loans were flat and investment loans rose by 1.6 per cent after slumping by 7 per cent in September.
The value of loans by owner-occupiers and investors to build new homes rose by 6.2 per cent in October to $3.23 billion after falling for the three previous months. 
Housing finance – other statistics
The value of cancelled loans fell by 0.2 per cent in September after increasing by 6.3 per cent in August.
Commitments advanced fell by 9.4 per cent in October but were still up 8.5 per cent on a year ago.
The proportion of first-time buyers in the home loan market rose from 17.4 per cent to a near 5-year high of 17.6 per cent in October (decade-average 17.9 per cent).
The proportion of fixed rate loans fell from 17.5 per cent to 16.7 per cent in October.
And the average home loan across Australia stood at $374,600 in October, up just 0.4 per cent on a year ago.
What is the importance of the economic data?
Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
What are the implications for interest rates and investors?
The heat has come out of the home loan market. Aussies are still borrowing, but are weighing up purchases more closely. And first home buyers are more active, armed with state government buyer grants.
Interest rate settings are firmly on hold. The softening of the housing market is yet more good news for the Reserve Bank.
Originally Craig James, Chief Economist, CommSec