Interest rate rises have taken their toll on the mortgage market, with the value of new loans dropping for the ninth month in a row.
New home loans have hit their lowest value since December 2020, with $25.79 billion in mortgages approved in October according to new data from Rate City.
That represents a 2.7 per cent fall since September, and a whopping 17.1 per cent drop in the past year.
Rate City research director Sally Tindall warns that there are still more declines to come.
“The market for new home loans is continuing to slide, alongside cooling property prices.”
“Seven consecutive RBA hikes has borrowers spooked, and with another hike coming, potentially as soon as Tuesday, there’s likely to be further drops in lending to come,” she said.
“While many would-be buyers have seen their budgets self-combust at higher rates, others are keeping a keen eye on the drops, hoping for an opportunity to nab a bargain once prices bottom out.”
First homebuyer loans took an even larger tumble, dropping 3.2 per cent in the past month and almost 26 per cent from the same time a year ago.
There are positives and negatives to the RBA’s consistent rate hikes, according to Ms Tindall.
“The drop in property prices means first home buyers no longer need to save as much for their all-important deposit, but they’ll still have to prove to the bank they can pay the mortgage at higher rates.
Despite a drop in refinancing in the past month, both owner-occupiers and investors are still changing their home loans at “extremely elevated levels”, according to RateCity.
October saw $17.84 billion worth of loans externally refinanced in October.
“Refinancing might have dropped again this month but it’s still at near record highs, with over $17 billion worth of loans refinanced in just one month,” Ms Tindall said.
“While banks are scratching around for brand new borrowers, they’re busy poaching existing ones from their competitors.
“Banks are throwing everything but the kitchen sink at customers willing to move their mortgage on to their books, with rate discounts and cashbacks at the ready to woo new business” she said.
Borrowers are also turning their back on fixed mortgage amid the RBA’s cash rate hikes.
The proportion of new and refinanced lending opting for a fixed rate contract was just 4 per cent in October.
That’s fallen dramatically from July 2021 when 46 per cent of all new and refinanced loans were fixed.