Michael BlebySenior Reporter

Feb 11, 2020 – 12.58pm

New home loans grew at their fastest pace in more than three years in December, as first home buyers roared back into the market and investors joined the rush.

The 4.4 per cent increase in new mortgage commitments – excluding refinancing of existing loans – was the biggest monthly gain since the 4.9 per cent increase seen in September 2016 and lifted December’s total to $19.6 billion, Australian Bureau of Statistics figures released on Tuesday showed.

New first home buyer loans picked up 6.2 per cent month on month to $4 billion – 38 per cent above the same month a year earlier – while investor loans rose 2.8 per cent to $5.4 billion, the highest monthly total since October 2018.

New mortgages are growing at their fastest rate in three years. 

BIS Oxford Economics principal economist Tim Hibbert said the figures, which also showed the number of owner-occupier loans rose “strongly” with a 3.5 per cent increase to 27,496 in December, showed the outlook for housing credit was strong this year.

“This was the best monthly growth result since mid-2015,” Mr Hibbert said.

“All demand segments are firing, with the strongest growth coming through for first home buyers. The First Home Loan Deposit Scheme commenced 1 January has had a strong take up, which will further propel first home buyer demand upwards in March quarter 2020.”

The building industry welcomed the strong growth in first home buyers.

“December 2019 saw the volume of First Home Buyer home loans surge to their highest level since late 2009” Master Builders chief economist Shane Garrett said.

“During December, the volume of home loans to first home buyers increased by 6.2 per cent in seasonally-adjusted terms to record a monthly total of 9,606. The last time a higher monthly total was recorded was exactly ten years ago back in December 2009.”

The stronger-than-expected increase in loans – economists had expected a 1.6 per cent increase, less than half the actual rise – was boosted by a 6.4 per cent month-on-month increase in refinancing of existing loans, a stronger figure than in previous months, JP Morgan economist Ben Jarman said.

“Over the last year, owner-occupier lending is up 17.9 per cent year on year in value terms, while volumes are up only 3.5 per cent year on year,” Mr Jarman said.

“This is consistent with financing conditions having eased for a subset of potential borrowers, boosting average loan sizes (and house prices), rather than a broad easing of conditions for all borrowers.”

The figures add to concerns that the housing market recovery is not widely spread across the market. And they also suggest that housing affordability is likely to return as a widespread problem.

“Since the election the average new home loan has lifted by around $60,000 or 16 per cent,” CommSec chief economist Craig James said.

“Rate cuts and increased buyers enthusiasm for property have driven the gains. But with wages growing at a 2.2-to-2.3 per cent annual pace, affordability constraints may soon temper the optimism.”