Summary: Value of loan commitments up 2.2% in August, more than expected; 9.4% lower than August 2022; Westpac: a gradual up-trend coming from weak starting point; value of owner-occupier loan approvals up 2.6%; investor approvals up 1.6%; number of owner-occupier home loan approvals up 2.5%.
The number and value of home-loan approvals began to noticeably increase after the RBA reduced its cash rate target in a series of cuts beginning in mid-2019, potentially ending the downtrend which had been in place since mid-2017. Figures from February through to May of 2020 provided an indication the downtrend was still intact but subsequent figures then pushed both back to record highs in 2021. However, there has been a considerable pullback since then, although the total value of new loans is still elevated by historical standards.
August’s housing finance figures have now been released and total loan approvals excluding refinancing increased by 2.2% In dollar terms over the month, more than the flat result which had been generally expected and in contrast with July’s 1.1% fall. On a year-on-year basis, total approvals excluding refinancing fell by 9.4%, up from the previous month’s comparable figure of -14.0%.
“The mix showed gains led by owner occupier loans for the purchase of existing dwellings with other segments a touch softer,” said Westpac senior economist Matthew Hassan. “The picture continues to be one of a gradual up-trend coming from a weak starting point, the total value of finance approvals still 27% below the peak at the start of last year.”
Long-term Commonwealth Government bond yields rose moderately on the day, somewhat lagging overnight movements of US Treasury yields. By the close of business, the 3-year ACGB yield had crept up 1bp to 4.10% while 10-year and 20-year yields both finished 5bps higher at 4.56% and 4.87% respectively.
In the cash futures market, expectations regarding further rate rises softened slightly. At the end of the day, contracts implied the cash rate would increase from the current rate of 4.07% and average 4.125% through November, 4.195% in December and 4.275% in February. May 2024 contracts implied a 4.31% average cash rate while August 2024 contracts implied 4.30%, 23bps more than the current rate.
The total value of owner-occupier loan commitments excluding refinancing increased by 2.6%, in contrast with July’s 1.6% fall. On an annual basis, owner-occupier loan commitments were 12.5% lower than in August 2022, above July’s comparable figure of -17.3%.
The total value of investor commitments excluding refinancing increased by 1.6%. The rise followed a 0.3% decline in July, slowing the contraction rate over the previous 12 months from 7.2% to 3.0%.
The total number of loan commitments to owner-occupiers excluding refinancing increased by 2.5% to 25,504 on a seasonally adjusted basis. The rise contrasted with July’s 2.2% decrease and the annual contraction rate slowed from 15.8% after revisions to 12.3%.
