Mortgage size offsets approval numbers in November

16 January 2020

A very clear downtrend was evident in the monthly figures of both the number and value of home loan commitments through late 2017 to June 2019. Then the RBA began to reduce its cash rate target in a series of cuts. Both the number and value of mortgage approvals began to noticeably increase during that time.

November’s housing finance commitment figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers fell by 0.7%, a small improvement on October’s revised figure of -0.9%. However, on an annual basis, the growth rate deteriorated for a second consecutive month, from October’s revised figure of -4.0% to -4.2%.

Australian Commonwealth Government bond yields fell on the day, although the falls were largely in line with moves in US Treasury bond markets. By the end of the day, the yield on 3-year, 10-year and 20-year ACGBs had all lost 3bps to 0.77%, 1.20% and 1.61% respectively.

Expectations of future rate cuts hardened in the cash futures market. At the close of trade, February contracts implied another 25bps rate cut was a 56% chance, up from the previous day’s 51%. The likelihood of a rate cut at the RBA’s March meeting was 73%, up from 68% while April contracts implied a rate cut was fully priced in.