Share of first home buyers at decade high
Lending indicators

Home loans: The value of home loans fell by 1.7 per cent in February with owner-occupier loans down by 1.7 per cent and investor loans down by 1.9 per cent.

First home buyers: The number of first home buyers hit a decade high of 9,734 in February, representing 36.2 per cent of all owner-occupier loans.

Car loans: Loans to buy used and new cars hit 2-year highs in February.

The lending figures have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending.

What does it all mean?

• Ahead of the COVID-19 crisis, first home buyers were at their most active in a decade. But the question is whether these activity levels will hold. Interest rates may be at record lows, but the job market is a far different place to what it was a few months ago.

• The average loan to buy an established dwelling eased by 5.5 per cent from record levels in February. Annual growth rates near 20 per cent were never sustainable. Still, the average loan is up almost $50,000 since the Federal Election. Buyers and sellers will both need to adjust to the new environment, so both will likely tread warily in the weeks ahead.

What do the figures show?

• The value of total new home loan commitments to households fell by 1.7 per cent in February but were still up 13.1 per cent on a year ago. The value of new owner occupier home loan commitments fell by 1.7 per cent to be up 15.8 per cent over the year. And the value of new investor home loan commitments fell by 1.9 per cent to be up by 6.3 per cent over the year.

• The number of owner occupier construction loans rose by 1.9 per cent in February (value up 2.7 per cent); loans for purchase of newly-erected dwellings fell by 8.9 per cent (value down 9.2 per cent); loans for purchase of existing dwellings fell by 1.3 per cent (value down by 1.4 per cent).

• The number of loans to first home buyers in February rose by 0.4 per cent with the value of lending up 0.3 per cent.

• The share of first-home buyers for non-investment loans rose from 35.4 per cent to a decade high of 36.2 per cent in February.

• In terms of owner-occupier home loans by state in February (value, excluding refinancing): NSW (down by 8.7 per cent); Victoria (down by 3.8 per cent); Queensland (up by 4.7 per cent); South Australia (down by 1.5 per cent); Western Australia (up by 5.9 per cent); Tasmania (up by 6.6 per cent); Northern Territory (down by 5.2 per cent); ACT (down by 2.7 per cent).

• Personal finance fixed term loan commitments fell by 0.5 per cent in February but were still up 10.1 per cent on a year ago. Car loans stood at a 2-year high of $1,129 million in February.

• Personal lending from revolving sources (including credit cards) fell by 9.3 per cent in February after rising by 2.8 per cent in January. Loans were down by 24 per cent over the year.

• New finance leases rose by 1.7 per cent in February after rising 4.5 per cent in January. Loans were up 9.5 per cent on the year.

• The value of new loan commitments to businesses for construction rose by 8.9 per cent in February but were down by 19.8 per cent on a year ago. Loans for the purchase of property by business rose by 13.4 cent to be up by 1.6 per cent over the year.

What is the importance of the economic data?

• “Lending Indicators” is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.

What are the implications for interest rates and investors?

• Home lending eased in February. But to put it in context it was the first drop in nine months – a 1.7 per cent fall, after rising just over 20 per cent from the lows.

• First-home buyers accounted for just over one in every three loans taken out in February. Caution on job prospects and new selling arrangements for homes will put a handbrake on future activity. As is the case with almost everything – it all depends on COVID-19 from here.

• Car loans hit a 2-year high in February. But with the latest new car sales figures far from inspiring, it’s likely that more buyers are preferring the used car market. Certainly 2-3 year old cars probably still have a fair bit of their warranties to go.

Published byCraig James, Chief Economist, CommSec