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New research from RateCity has found that the value of new loans delivered in April has fallen by $2.13 billion as Australians place their home ownership plans on hold.
The drop has been attributed to Australians anticipating May’s cash rate increase by the Reserve Bank of Australia (RBA), while talk continues to surround a further increase to the figure for the month of June, with the RBA’s decision to be handed down this afternoon (7 June).
Month-on-month lending to owner-occupiers fell by 7.3 per cent in April, a decrease valued at $1.57 billion, while investor lending dropped by $557 million in the same time frame, although this figure is still up 3 per cent from April last year.
RateCity research director Sally Tindall stated that the cooling of property prices driven by increasing interest rates has been the driver behind buyers retreating.
“New lending has nose-dived as droves of potential buyers put their plans on ice while they wait to see what impact the interest rate hikes have on the property market,” Ms Tindall said.
“Investor lending has seen its biggest drop since May 2020, when buyers fled the market at the start of COVID when property forecasts looked bleak.”
Ms Tindall expects investors will continue to hold off on plans with interest rates predicted to rise yet again, however, she does believe the lack of investor activity may present new opportunities for owner-occupiers to enter the market – especially given the presence of government home ownership assistance.
“While it has been a bleak year for first home buyers, with investors now retreating, they may finally get [a] foot in the door in the coming months if prices drop,” Ms Tindall said.
“The new government’s programs, which include the Help to Buy and the Home Guarantee scheme, will get some people onto the property ladder.
“However, buyers need to be aware of the risks of purchasing a new home in a falling property market with a small deposit.”
With a widespread expectation that the rate will once again rise, she has also implored home owners and investors alike to prepare for interest rates to rise by as little as 0.25 percentage points or as much as 0.40 percentage points in the immediate term.
“A rate hike again this month is a near certainty, however, how high the RBA goes remains to be seen. The Board may stick to a standard 0.25 percentage point hike, but there’s every chance it will be more hard hitting,” she said.
