Summary: Home loan approvals rise in number and value in June; gain larger than expected; COVID shock “milder and briefer”; owner-occupier, investor loans both rise in dollar terms; average loan size for owner-occupiers up by 15%; income, job disruptions likely to maintain downward pressure on borrowing capacity of home buyers.
A very clear downtrend was evident in the monthly figures of both the number and value of home loan commitments through late-2017 to mid-2019. Then the RBA reduced its cash rate target in a series of cuts and both the number and value of mortgage approvals began to noticeably increase. Figures from February provided an indication the trend may have finished but the confirmation only really came through with May’s figures.
June’s housing finance figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers increased by 7.1%. The gain came after a 7.6% fall in May and, on an annual basis, the rate of contraction slowed from May’s figure of -8.0% to -2.3%.
“For financing, the shock from COVID has been milder and briefer than expected,” said Westpac senior economist Matthew Hassan.
Local Treasury bond yields barely moved on the day despite lower yields of their US Treasury counterparts in overnight trading. By the end of the day, the 3-year ACGB yield remained unchanged at 0.28% while 10-year and 20-year yields each finished 1bp lower at 0.84% and 1.43% respectively.
In dollar terms, total loan approvals excluding refinancing increased by 6.2% over the month. The rise was greater than the 2.5% which had been generally expected and a turnaround from May’s revised figure of -11.6%. On a year-on-year basis, total approvals excluding refinancing increased by 4.5%, an acceleration from the previous month’s comparable figure of +1.8%.
“The rebound in housing finance of 6.2% in June reflects improved economic conditions and more auctions after the low in April,” said ANZ economist Adelaide Timbrell.