Number of home loan approvals up 1.5% in December; value of loan commitments up 4.4%; total value of approvals hits new cycle high; value of owner-occupier loan approvals up 5.3%, investor approvals up 2.4%; “growing risk” lending resurgence continues in first half of 2022.
After the RBA reduced its cash rate target in a series of cuts beginning in mid-2019 the number and value of approvals began to noticeably increase, 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 elevated levels.
December’s housing finance figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers rose by 1.5%. The increase was smaller than November’s 4% rise, taking the annual growth rate from November’s figure of 1.0% to -3.4%.
The figures were released on the same day as December’s preliminary retails sales report and the RBA Board’s latest monetary policy announcement. Commonwealth Government bond yields barely changed on the day and, by the close of business, the 3-year ACGB yield had inched up 1bp to 1.38%, the 10-year yield had returned to its starting point at 1.92% and the 20-year yield had slipped 1bp to 2.39%.
In dollar terms, total loan approvals excluding refinancing increased by 4.4% over the month, considerably more than the 0.8% decline which had been generally expected but not quite as large as November’s 6.3%. On a year-on-year basis, total approvals excluding refinancing increased by 26.5%, down from the previous month’s 33.2%.
“At $32.8 billion, the total value of approvals hit a new cycle high, up 11% on the ‘delta lockdown’ low in October but only marginally above its May peak. That compares to the total value of property sales, which finished 2021 nearly 20% above its mid-year peak, suggesting rise in finance approvals still has some way to go,” said Westpac senior economist Matthew Hassan.
The total value of owner-occupier loan commitments excluding refinancing increased by 5.3%, a little less than November 7.6%. On an annual basis, owner-occupier loan commitments were 12.4% higher than in December 2020, whereas November’s annual growth figure was 17.2%.
The total value of investor commitments excluding refinancing arrangements increased by 2.4%. The rise follows a 3.8% increase in November and it is the fourteenth month of consecutive gains since the last monthly decline in October 2020. On an annual basis, the value of loan commitments in the month was 73.9% higher than in December 2020, down from 86.9% in November.
“There is a growing risk that the resurgence of lending could continue in the first half of 2022, as low rates of unemployment and likely stronger savings rates during Omicron support borrowing. If lending continues at this pace, APRA may consider more measures to slow it,” said ANZ senior economist Adelaide Timbrell.