Home loan approvals declined for a third straight month because of higher interest rates, rising property prices and an exodus of first home buyers even though investors began returning to the market, economists say.

Australian housing finance commitments for owner-occupied housing fell 5.5 per cent in December, seasonally adjusted, to 55,632, the Australian Bureau of Statistics (ABS) said on Wednesday.

The result was weaker than economists’ expectations for a fall of five per cent in the month.

Total housing finance by value fell by 2.8 per cent in December, seasonally adjusted, to $21.9 billion.

The decline in approvals in December coincided with a winding back to the temporary boost to the government’s first home owners grant.
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Fixed rate home loan approvals drop to below 3%

The popularity of fixed interest rate home loans across Australia has continued to fall, according to October 2009 data from Mortgage Choice, Australia’s largest independently-owned mortgage broker. Fixed rate loans now account for less than 3% of all new loan approvals, while the demand for variable rate loans rose by two percentage points, to 97% of approvals.

Fixed rate products have accounted for less than 10% of the company’s new loan approvals for the past 16 months, while variable rate loans have become almost exclusively the loan of choice for recent home loan borrowers.
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The recent trend of fixed rate loans comprising only a minor proportion of all new Australian home loans appears to have bottomed out. Demand for loans with fixed interest rates rose for the third month in a row in May 2009, to 7% of all Mortgage Choice loan approvals.

Basic variable loan demand continues to rise, reaching 49% after a brief dip in March and April. The only other time it has hit this level, since Mortgage Choice began recording such data in January 2003, was in February 2009.

Standard variable loans, many of which are professional packages (where eligible customers with a loan worth over $150,000 can receive discounts on the interest rate along with other professional package features), fell for the second month in a row, to 39% of all approvals.
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First home buyers continue to boost the demand for new housing loans, supported by government grants and low interest rates, economists say.

Housing finance commitments for owner-occupied housing rose 0.9 per cent in April, seasonally adjusted, to 60,395 the Australian Bureau of Statistics said on Wednesday.

It was the seventh monthly rise in a row, and the highest number of home loan approvals since February 2008.

The result in April was below the market forecast of a rise of 1.5 per cent, however.

The number of loans to buy new homes fell 0.5 per cent, while commitments to build dwellings were up 1.3 per cent.
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In a sign interest rate cuts by the Reserve Bank of Australia (RBA) are starting to flow through to consumers, the number of home loan approvals increased slightly in October.

But economists caution it is too early to pronounce a recovery in the housing market amid continuing economic uncertainty.

The number of home loan approvals for owner-occupied housing rose by 1.3 per cent in October, seasonally adjusted, ending a run of eight consecutive monthly declines.

The value of all loans for owner-occupied housing increased by 1.9 per cent.
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