Fresh figures from the Australian Bureau of Statistics show a clear divergence in home lending, with investor loans declining and a strong pickup in owner-occupied borrowing.
The May housing finance data, released this week, showed a 1.4 per cent contraction in the value of investor loans and a 2.9 per cent increase in owner-occupied mortgages, bringing the total increase in home lending to 1.3 per cent over the month.
Mortgage Choice chief executive John Flavell said the bounce back in home loan demand is a positive sign for the property market and the broader economy.
“That said, this bounce back in home loan demand is hardly surprising. The fact is, the property market remains relatively buoyant, with historically low interest rates keeping the cost of borrowing low and heat in the market,” Mr Flavell said.
According to the data, the value of all dwelling commitments rose 1.3 per cent to $33.03 billion over the month of May.
“While there was a 2.9 per cent rise in the value of home loan approvals for owner-occupied housing, we saw a 1.4 per cent drop in the value of investment loans," Mr Flavell said.
“Of course, I am not at all surprised by this. Over the past few months, Australia’s banks have been significantly tweaking their policy and pricing in relation to investment lending.
“In particular, we have seen some significant changes in the area of interest-only loans. Some lenders have raised their pricing, while others have adjusted their policy.
“As a result, we have seen some potential property investors put their purchase plans on the backburner indefinitely.”
Looking forward, Mr Flavell said he expected home loan demand to remain relatively strong, especially in the owner-occupied space.
“Interest rates are still low and will remain so for some time to come. In addition, some of the states have introduced new first home buyer incentives, which should also help to keep some heat in the market,” he said.
“That said, the Australian property market is very complex at the moment. So, anyone thinking of buying or refinancing should speak to their mortgage broker to ensure they find the right product for their needs.”
[Related: ING lifts IO rates by 35 points]