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Why Homebuyer Borrowing Plunged in April Despite Strong Housing Demand

Why Homebuyer Borrowing Plunged in April Despite Strong Housing Demand

The lending market experienced yet another slump in April as new home commitments continued to decline due to higher interest rates and suppressed demand for housing.
According to research, home loan borrowers decreased by 2.9% monthly, following a 5.3% increase in housing-related borrowing in March.
The value of owner-occupier lending declined by 3.8%, while investor borrowing dropped a small 0.9%, with the total housing lending still down by 25.8% in comparison to how it performed last year.

Market Observations

Senior economist at Oxford Economics Australia, Maree Kilroy, noted that the reduction in new home listings has led to a decreased supply of real estate and a return to price growth in markets such as Sydney, Melbourne, and Perth. However, she warns there is no certainty that price growth will continue throughout 2023. Kilroy points out that it is too soon to rule out the impact of rising interest rates on at-risk borrowers and their potential to affect property prices on the back half of 2023.

The Struggling Home Building Sector

The lending slump has also affected the home building sector, with a sharp decrease in loans to construct dwellings. In April, only 2,546 loans were approved, marking a historical low. The current demand for housing seems to be outstripping supply, and there is limited development in the sector to make up for the deficiency.

Final Thoughts

Overall, the decrease in homebuyers borrowing in April is a reminder of the impact interest rates and supply can have on the demand for housing. While we are witnessing price growth in some markets, we cannot ignore the struggles of the home building sector and at-risk borrowers. The future remains uncertain, and it will be interesting to see how the market adjusts in the coming months.

Published:Saturday, 3rd Jun 2023

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A loan in which the borrower (the mortgagor) offers a property and land as security to the lender (the mortgagee) until the loan is repaid. Repayments of the loan are usually made on a monthly basis over a long period of time, typically 25 years.