Home loans up but have 'peaked', warns economist

The threat of higher interest rates in 2017 is not putting home borrowers off, new figures show.

The spike in home loans in November to 54,603 - up 0.9% - suggests the looming threat of higher interest rates is failing to dampen housing demand.

 The value of loan approvals in November also soared to $33 billion - up 2.2% - compared to October, statistics released by the Australian Bureau of Statistics today show.

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Loan approvals for the construction of new homes, the purchase of new and established properties all rose in the second last month of 2016, despite creeping global uncertainty in November including the election of Donald Trump as US President coupled with the prospect of interest rates hikes both in the US and closer to home looking increasingly likely. 

However, Australia’s lending cycle has peaked, warned the Housing Industry Association Chief Economist, Harley Dale.

“The November results confirm that the elevated volumes of lending we have seen over the last three and a half years remained in play as 2016 neared an end.”

There was 225,000 homes including units built in Australia last year, which is a record figure, and unlikely to be repeated in 2017, Shane Garrett, Senior Economist at HIA told Yahoo7 Finance. The primary driver of Australia's swollen loanbook in November was many of these builds were completed, which is when the loan kicks in.

Nonetheless, the increase in home borrowing bodes well for the economy.

Although home loans lifted in five out of eight regions, New South Wales and Victoria are faring the best overall, Dale added.

The fastest growth occurred in Tasmania, which rose 28.4 per cent, followed by Queensland up 20%, while home loans in both New South Wales and Victoria rose just under 10 per cent.

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Not surprisingly, home loans tumbled in regions affecting by the end of the mining boom, including the Northern Territory – down 58% and Western Australia. The ACT also fell 23 per cent.