Home lending soars in October despite surge in borrowing costs

The purchase of new home loans continued to rebound in October as borrowers defied the rise in lending costs and growing pressures on family budgets.

The value of new home loan commitments for owner occupiers and investors rose 5.4 per cent to $26.8bn over the month, according to seasonally adjusted data released by the Australian Bureau of Statistics on Monday.

Since the Reserve Bank began its punishing round of rate hikes in the May 2022, a family with two children and a combined income of 150,000 has seen the amount they can plunge by as much as 32.8 per cent ($247,600) to $508,200.

But first home buyers, many of whom are finding it increasingly challenging to break into the housing market as real income growth lags behind soaring property prices, defied cost pressures to purchase more loans in October.

Across the month, 9781 home buyers signed up to their first loan. This is the highest number of new loans purchased by first time buyers since August 2022, when the cash rate was just 1.85 per cent.

The value of home lending to owner occupier first-home buyers similarly increased, lifting 6.2 per cent in October 2023 to $5bn, up 11.8 per cent on a year ago.

The uptick in new household borrowing comes amid growing bets that interest rates may have peaked at 4.35 per cent with money markets pricing just a 28 per cent chance that the Reserve Bank will hike rates before May 2024.

At its final board meeting for the year, scheduled for December 5, the central bank is widely expected to keep rates on hold, easing fears among borrowers that their mortgage repayments are set to rise further.

The value of new loans for the purchase of the cars and other road vehicles increased to a fresh peak, reaching more than $1.4bn in October.

More than $51 million of new loans were written to cover travel and holidays over the same period, slightly lower than September, as households borrowed through the cost of living crunch to fund personal trips.