The latest ABS Lending Indicators data reveals a surprising shift in December, marking an end to the recent growth spurt in new housing loans.

A noteworthy decline of 4.1%, down to $26.27 billion, breaks the consecutive five-month growth streak.

The most significant drop was observed in the owner-occupied segment, with new loan commitments plummeting by 5.6% to $16.77 billion.

This downturn disrupts four months of consistent growth, signalling a potential shift in the housing market dynamics.

Investment property loans weren’t immune to this trend, experiencing a 1.3% fall to $9.50 billion – the first in ten months.

Interestingly, the first-time homebuyer sector also saw a decrease of 5.5%, down to $4.87 billion, deviating from its four-month upward trend.

Canstar’s lending authority, Steve Mickenbecker, offers a sobering perspective:

“December’s decline indicates the recent recovery in new lending might have been a mirage.

The owner-occupier market, in particular, has significantly slowed, now only 7.4% ahead of its position in the face of a pessimistic interest rate outlook last year.

Yet, investment lending, while slightly down, remains a robust 20.4% higher than December 2022.

This resilience, buoyed by the 2023 housing price recovery and investor optimism, suggests a sustainable growth trajectory in this segment.

Despite a strong overall recovery in housing prices, with Brisbane, Perth, and Adelaide hitting 2021 highs, the cooling markets in Melbourne and Sydney hint at a waning demand, likely influenced by rental and immigration trends.

The recent dip in inflation could be the silver lining for 2024, potentially revitalizing the lending market and bolstering buyer confidence against further rate hikes.”

Fewer borrowers snatching up new deals with refinancing trending down in December

December also witnessed a downtrend in refinancing, with a 1.6% decrease compared to November, coinciding with the latest Reserve Bank cash rate rise.

The year-end saw $17.13 billion in loans switched to new lenders, a notable decline from July 2023’s peak of $21.5 billion.

Canstar’s analysis underscores the impact of the 4.25 percentage point cash rate increase since April 2022, adding approximately $1,562 to monthly repayments on a $600,000 loan.

With the November rate hike’s full impact yet to be felt, a resurgence in refinancing activity is anticipated.

Mickenbecker advises borrowers not to wait for the Reserve Bank’s next move but to proactively seek better rates now, either through negotiation or switching lenders.

In summary, December’s lending landscape shows a complex interplay of market forces, with potential shifts on the horizon for 2024.

Summary of the ABS Lending Indicators data for December 2023:

About Robert Chandra
Robert Chandra is a Property Strategist at Metropole and has an intrinsic understanding of property markets backed by many years of real estate experience. This coupled with several degrees gives him a holistic perspective with which he can diagnose clients’ circumstances and goals and formulate strategies to bridge the gap.