Home loan approvals drop, as banks tighten lending requirements

The demand for home loans slumped to a two-year low last month, despite the historically low interest rate environment.

According to the May Housing Finance data from the ABS, 50,366 home loans were approved in May - the smallest number of home loan approvals recorded since August 2013.

The data also revealed a 6.1% drop in the number of dwelling commitments for all owner occupied housing, and an 8.3% drop in the number of home loans approved for the construction of dwellings.

The value of all dwelling approvals also recorded a fall with $31 billion worth of homes approved over May, down 4.4% on the month prior. Of this, the value of owner occupied dwelling commitments was $18 billion while the value of investments loans was $13 billion, down 5.3% and 3.2% respectively.

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Mortgage Choice chief executive officer has attributed the dip in home loan activity to new lending restrictions which were effected during May.

“Over the month of May, we saw a number of lenders make some significant adjustments to their lending policy in a bid to curb their level of investment growth,” he told Australian Broker Online.

“Of course, while some of the changes made applied purely to investment lending, others went right across the board and impacted both owner occupiers and investors.”

Flavell said he wouldn’t be surprised if this weaker level of demand continued given the global uncertainty from the economic problems in Greece and China and that winter in Australia is a “notoriously quiet time for the property market.”

With that said, Flavell said that while demand may weaken further over the coming months, these levels of demand and the value of home loans written are still very high by historical standards.