Mortgage lending fell as COVID-19 loomed

The value of new home loans fell by a worse-than-expected 1.7 per cent in February even before the most serious coronavirus lockdown measures were in place.

Economists had tipped the total value of housing loans to slow from 4.6 per cent growth in January as the COVID-19 outbreak emerged into the national consciousness.

But a $1.26 billion decline in the total value of housing loans to $19.46 billion was well at odds with the predicted 1.5 per cent increase.

The value of owner-occupier, investor and fixed-term personal lending went backwards during February as news gathered pace of the coronavirus spread across Asian and European nations. 

BIS Oxford economist Maree Kilroy said the February result was too early to see the impact of the COVID-19 shock on the housing sector but it had begun to show through in forward leading indicators of housing demand such as auction clearance rates and confidence surveys. 

“Whilst construction is still deemed an essential sector, allowing the supply of new dwellings to continue albeit with disruptions, demand for new housing will be significantly weaker as the churn of dwellings seizes in June quarter and households put on hold stage of life decisions,” Ms Kilroy said. 

Owner-occupiers took out $14.15 billion in mortgages during February, down 1.7 per cent on the previous month.

Investors took out $5.31 billion in loans, down 1.9 per cent. 

The number of loans for the purchase of new and existing homes went backwards.  

First home buyers borrowed $4.11 billion – an increase of 0.3 per cent on January – but well below the 4.6 per cent growth rate experienced during the first month of the year. 

The number of new loans for owner-occupiers rose by 0.4 per cent to 9,734, slowing from a 4.8 per cent rise in January.  

The number loans for home building slowed from 4.2 per cent in January but still rose by 1.9 per cent for the month. 

Housing Industry Association economist Angela Lillicrap said the building figures showed the strong market conditions since mid-2019 would likely have continued were it not for the economic disruption of the coronavirus.

“These results show that at least until the end of February, we were looking at solid home building activity across most regions in 2020,” Ms Lillicrap said.

Lending for businesses rose by 8.9 per cent for construction and 13.4 per cent for property purchases. 

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