The number of home loan approvals slipped 4.8% in April to $18.6 billion, according to recent data from the Australian Bureau of Statistics (ABS), the largest month-on-month decline since May 2015
Low confidence, fragile finances, and outright bans on auctions and open home inspections saw mortgage approvals fall by 5% to $13.7 billion for owner occupiers, and 4.2% to $4.8 billion for investors.
However, the ABS noted that the overall drop in lending activity was tempered by a backlog of applications from March, which took longer than usual to process due to disruptions caused by the coronavirus outbreak.
Momentum has slowed for first home buyers too. Though they make up around a third of all owner occupied home loan commitments, mortgage approvals among the cohort pulled back by 3.8%.
While the fall in new commitments was smaller than expected, lending activity is expected to remain depressed in the months ahead as the current economic crisis weighs on households’ finances and appetite for debt.
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But things haven’t been so downbeat for existing mortgage holders, who are taking advantage of record low interest rates to switch to better deals. Over the month, $7.9 billion of owner occupier home loans were refinanced, an increase of 50% from last year.
The current rate setting has fueled intense competition among lenders. Before the RBA cut official interest rates back in March, the average variable rate on a $400,000 loan (owner occupier, 80% LVR) sat at 3.68% p.a. By June that number had fallen to 3.43% p.a.
Fixed rates have seen an even sharper drop. In March, the average 2-year fixed home loan rate was 3.14% p.a. It now sits at 2.59% p.a. — a difference of 55 basis points.
If you’re paying too much on your mortgage and are looking to refinance to a cheaper loan, be sure to visit our home loan comparison page for an overview of what’s available, or browse the selection below.