Value of loan commitments up 2.6% in January; owner occupier activity “looks to be nearing peak”; high levels of lending “likely” through first half before cash rate increases; value of owner-occupier loan approvals up 1.0%, investor approvals up 6.1%; number of home loan approvals up 0.2%.
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.
January’s housing finance figures have now been released and total loan approvals excluding refinancing increased by 2.6% In dollar terms over the month, more than the 0.3% rise which had been generally expected but not quite as large as December’s 4.4%. On a year-on-year basis, total approvals excluding refinancing increased by 18.2%, down from the previous month’s 26.5%.
“Overall, while investor activity has retained strong momentum, owner occupier activity, which has driven the cycle to date, looks to be nearing a peak as key segments start to turn lower,” said Westpac senior economist Matthew Hassan.
The figures were released on the same day as the RBA Board’s latest monetary policy announcement and longer-term Commonwealth Government bond yields moved higher. By the close of business, the 10-year ACGB yield had gained 5bps to 2.20% and the 20-year yield had added 6bps to 2.61. The 3-year yield finished unchanged at 1.58%.
ANZ senior economist Adelaide Timbrell made a similar observation to Westpac’s Hassan but tied her view to the RBA’s monetary policy. “We are likely to see high levels of lending maintained through the first half of this year at least, before cash rate increases hit the market.”
The total value of owner-occupier loan commitments excluding refinancing increased by 1.0%, down from December’s 5.3%. On an annual basis, owner-occupier loan commitments were 3.4% higher than in January 2021, whereas December’s annual growth figure was 12.4%.
The total value of investor commitments excluding refinancing arrangements increased by 6.1%. The rise follows a 2.4% increase in December and it is the fifteen 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 67.8% higher than in January 2021, down from 73.9% in December.
The total number of loan commitments (excluding refinancing loans) to owner-occupiers rose by 0.2%. The increase was smaller than December’s 1.5% rise and the annual growth rate went further into the red, from -3.4% in December to -11.7%.
