Mortgage demand takes biggest hit in a year

Another sign that the red-hot market is starting to cool?

Mortgage demand takes biggest hit in a year

Mortgage demand took its biggest hit in a year in June, another sign that Australia’s red-hot housing market may be starting to cool.

The value of new home loans fell 1.6% in June to $32.1 billion, according to the latest data from the Australian Bureau of Statistics. Loans to owner-occupiers dropped 2.5% to $22.9 billion.

“While this was the largest fall since May 2020, owner-occupier commitments remained 76% higher compared to a year ago and 64% higher than pre-COVID levels in February 2020,” Katherine Keenan, ABS head of finance and wealth, told The Guardian.

The number of home building approvals was also down, dropping 6.7% to 18,911 in June. That included an 11.8% drop in private-sector houses to 12,037.

June marked the third straight monthly decline, reflecting the expiration of pandemic stimulus measures like HomeBuilder, The Guardian reported.

The news came as the Reserve Bank of Australia said the economic outlook was uncertain for the coming months and kept the cash rate unchanged at its record low of 0.1%.

“The economic recovery in Australia has been stronger than was earlier expected,” RBA Governor Philip Lowe said in a statement. “The recent outbreaks of the virus are, however, interrupting the recovery and the GDP is expected to decline in the September quarter.”

However, Lowe said that previous experience indicated that once virus outbreaks were contained, the economy would bounce back quickly.

Read next: Home prices set to surge – then fall – Westpac

Economists are predicting a sharp contraction in the September quarter, driven largely by the ongoing COVID-19 lockdowns in greater Sydney and regional New South Wales areas, The Guardian reported. Last month’s lockdowns in Victoria and South Australia are also expected to have a negative impact, as are the current restrictions in Queensland.

However, Michael Yardney of Metropole Property Strategists told The Guardian that the property market would bounce back.

“If lockdowns are extensive, our property market will go into hibernation for a while and then come out stronger than ever, just like they did last year,” he said.

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