Number of buyers in the market rising despite peak in the cash rate – new data reveals

The number of buyers entering the property market has continued to grow in the past year despite the cash rate peaking in the current rate cycle at 4.35%.

The latest ABS Lending Indicators show the number (in original figures) of first home buyers, owner-occupiers and investors in total has grown by 31% annually with 50,188 buyers in the market in April.

The value of the loans taken out by these buyers has also increased, rising in April for the third consecutive month according to the seasonally adjusted figures.

A total of $29.35 billion in new home and investment property loans were taken out in April, an increase of 4.8% from March.

Investors show the greatest strength, with the value of new loans rising by 5.6% from the previous month and 36.1% over the past year.

Following closely, upgraders and downsizers saw a 4.7% monthly increase and an 18.8% annual rise.

First-home buyers lagged, with the value of new loans rising by 3.4% in April and 18.6% over the year.

Canstar’s finance expert, Steve Mickebecker says:

“The value of home lending continued to recover in April, up by a healthy 4.8 percent for the month and 24.6 percent above April last year.

The market is showing remarkable resilience in the face of 4.25 percent of interest rate increases.”

He further commented:

“The recovery of home prices has bolstered lending. But even excluding the impact of higher prices, the market is showing its strength, with the number of new loans in April up 11,775 or 31 percent from a year earlier, shrugging off the impact of a further 0.75 percent cash rate increase in the same period.

The initial shock of 3.50 percent of cash rate increases in the year to April 2023 crashed the lending market, with the number of new loans down 25 percent from 51,042 in April 2022 to 38,413 in April 2023.

But that is where it has ended and apparently the market has found a floor, with the number of loans now almost recovered at 50,188.

Increased interest rates have put a whole group of borrowers under extreme pressure, especially those who borrowed in the couple of years preceding cash rate increases, and that pain continues.

But new borrowers are putting that behind them.”

The double dip benefit for refinancers

More borrowers secured a better deal in April, with the value of existing loans refinanced to a new lender rising by 1.7% compared to March, however, it remains 16.3% down compared to the same time last year.

A total of $19.54 billion in loans were switched to a new lender during April, which is still far below the $21.5 billion at the peak in July 2023.

Canstar explains that borrowers who have already refinanced could seek opportunities to ‘double dip’ and secure a lower rate by refinancing again.

Mr Mickenbecker further said:

“The Reserve Bank reports existing owner occupied borrowers are repaying their loan at an average variable rate of 6.39 percent.

This rate is still a long way from the top in terms of leading rates in the market. “