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$vuetify.icons.faPhone1300 650 620

Interest rate hikes hit home lending

Media release

Interest rate hikes hit home lending

Media release
“Loans for the construction or purchase of new houses fell by 4.0 per cent in July, highlighting the impact of the recent increases in the RBA’s cash rate,” stated HIA Economist, Tom Devitt.

The ABS released the Lending to Households and Businesses data for July 2022 today. The data provides sobering statistics on housing finance commitments.

“The rise in the cost of borrowing is compounding the impact of the rapid increase in the cost of building a new home that occurred due to the constraints on global supply chains,” added Mr Devitt.

“Declines were seen across all segments of the market, led by investors.

“The value of loans to investors fell by 11.2 per cent to their weakest month in over a year. This was followed by a 9.5 per cent decline for first home buyers, to their lowest level in over two years, and a 6.3 per cent decline for other owner occupiers. There was also a 3.3 per cent decline in lending for renovations.

“These declines in home lending are consistent with other leading indicators.

“New home sales across Australia declined by 13.1 per cent in July, following even earlier reports from the industry of a slowing in the number of groups visiting display sites. This will see weaker sales volumes in the second half of 2022.

“If these trends are sustained, which is expected, then the 1.75 per cent increase in the cash rate so far will have brought this pandemic building boom to an end.

“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023.

“There is a risk that this volume of ongoing work will obscure the adverse impact of rising interest rates,” concluded Mr Devitt.

 

Housing Loans, by Market Segment, $M

Source: ABS Housing Finance

For more information please contact:

Thomas Devitt

Economist

Tim Reardon

Chief Economist
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