First Home Buyers are Ruling the Market

Written by Mark Thomas

17 September, 2019

We are in the midst of a First Home Buyer Boom in NSW.  

NSW First Home Buyer (FHB) lending is on the rise and is breaking new ground with lending at 8-year highs. 

It’s time  to be excited about lending activity in NSW for the FHB.   

FHB lending was up an incredible 33.6% over the month and the highest since December 2011. On a 12 month rolling basis it is also very strong, up 27.1%

If we look at the lending activity it is clear that FHB lending in NSW has broken above it’s 2017/18 peak.  With new incentives coming into play in January 2020 this trend should accelerate into the new year.

First Home Loan Deposit Scheme:

The Morrison government has pledged $500m to support first-home buyers by lowering the required deposit needed to take out a home loan.

Under the First Home Loan Deposit Scheme, first-time buyers who are struggling to reach the 20% deposit requirement by lenders can apply for a home loan with as little as a 5% down payment. They will not be subject to lenders’ mortgage insurance since the government will underwrite their home loans and will serve as the guarantor.

Beneficiaries of the scheme will be able to receive support from the program for the life of the loan or until the mortgage is refinanced.

Looking at the established or owner occupied lending segment in NSW the news is positive but not new highs within the current cycle.  

On a monthly basis the news is encouraging.  Owner-occupier lending including refinancing in July was the highest it has been since November 2018 and was 19.4% higher over the month.

Over the 12 months period the value of lending is still falling, albeit only by 1.1%.  This is a great improvement from the declines in lending we saw just 7 months ago when lending fell by 20% in the year to January 2019.

Whilst there has been an uptick in the value of these lending values it has not broken the longer-term downtrend shown by the following chart.

This may well occur in the Spring and Summer if current activities continues such as confidence continuing to rise and banks starting to relax lending criteria.  Certainly the two interest rate cuts and the tax cuts have helped. Further rate cuts are also expected which should fuel an increase in lending activity.