More Home Loans Approved as the Market Recovers

In the June quarter, an increase of 28% was observed in the number of home loans that were approved by financial institutions, including banks. This represented $79 billion for the quarter, and indicated that the residential housing market is showing signs of recovery.

Official figures place the total exposure that Australian lenders had to residential property at $1.13 trillion – a figure that rose by 7.3% to June 2013.

The expansion of new lending is occurring more rapidly than the total exposure of the banking sector to property. This can be explained by many borrowers opting to use the record-low interest rates as a way to repay debts more hastily, thereby removing older loans from the books of banks.

Investors represent the most rapidly expanding type of property lending. For this group, approvals of investment loans increased by 35% to $27.8 billion in the quarter.

Tom Kennedy, a JP Morgan economist, recently predicted that lending will continue to flow into the area of property investment, prompted by the recovery of the housing market. He is of the opinion that with the rising house prices and the increasingly low interest rates investors are going to be even more attracted to the property market.


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