Home loan approvals fall in January - what’s holding Aussies back from entering the market?

Wednesday 14 March 2018

Article by Ceyda Erem

According to new data from the Australian Bureau of Statistics (ABS), home loan approvals for owner occupiers fell by 1.1% in January - a higher than anticipated figure given a number of economists expected a drop of only 0.2%.

Home loan approvals fall in January - what’s holding Aussies back from entering the market?

On the other hand, the value of home loans for investors increased by 1.1% between December and January.

And even though first home buyers are reportedly squeezing their way back into the market, the question is, what is holding other Aussies back from doing the same?

RELATED: NSW records the largest first home loan increase but is not the most affordable market

One answer might be current zoning restrictions driving up property prices, making it even tougher for Aussies to reach that 20% deposit.

In fact, a recent research paper produced by the Reserve Bank of Australia’s Economic Research Department found that despite the difference in dwelling structure and land value, zoning effect estimates accounted for the majority of average house prices in Sydney, Melbourne, Perth and Brisbane.

To be more specific, the paper found that these restrictions increased house prices by a marginal cost of 73% in Sydney, 69% in Melbourne, 54% in Perth and 42% in Brisbane.

Another more recent and controversial claim that’s impacting property prices could be the country’s credit issue.

RELATED: ANZ and NAB cut their fixed rate home loans - time to ‘nab’ yourself a fixed rate discount?

Principal Analyst at research and analysis firm, Digital Finance Analytics, Martin North believes that the easier access to credit in recent years has correlated to the rise in property prices, more so than the the supply and demand for houses and population combined.

"The correlation between home prices and credit availability are clear to see. As credit rose from 2012 onward, home prices did too," he said. 

"It suggests that if credit availability is tightened, we should expect prices to fall – take note, given the current tighter underwriting standards now in force. This is why I predict ongoing falls in property prices.”

But as the debate on how to cool property prices continues, there is one thing that all Aussie borrowers have in common - having to save up for a deposit. And since budgeting and scrimping can only go so far, we’ve jotted down a few tips and tricks you can use to help you break into the property market:

  • Take advantage of the First Home Owners Grant  This is a one-off and tax free payment that could help you reach that 20% deposit faster. So be sure to check out your state’s grant amount and requirement.
  • Know your repayments in advance - One of the ways to stay on top of all things property is to know your repayment amount. To do this, you can use Mozo’s home loan repayment calculator - and if you find your repayment amount to be higher than expected, you may need to adjust your goals or expectations from your dream home.
  • Go guarantor - If you are finding it hard to save for a deposit, why not ask a family member to go guarantor? While this allows them to act as security against your loan, it also means that your lender will hold your parents responsible if you ever default.

But if you’re an Aussie who’s ready to get approved, head over to our home loan comparison tool to check out some of the latest offers.

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