Summary: Home loan approvals rise in number and value in July; “broadly based” but Victoria the exception; reflected improved economic conditions, access to housing inspections; owner-occupier loan commitments surge but “not start of trend”; “a last hurrah” before Victorian lockdown; investor commitments up modestly; “massive wave” of refinancing activity.
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 through to May provided an indication the trend had finished but the last two sets of figures have contradicted that idea.
July’s housing finance figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers increased by 9.7%. The gain came after a 7.7% rise in June after revisions and, on an annual basis, the rate of growth increased from June’s revised figure of -0.6% to +7.8%.
“As with June, the July lift was broadly based but with some notable exceptions in Victoria, which continues to underperform, and around refinance activity, which has been unaffected by market disruptions and has been responding more to interest rate changes,” said Westpac senior economist Matthew Hassan.
Local Treasury bond yields fell, especially at the long end, largely following US Treasury movements in overnight trading. By the end of the day, the 3-year ACGB yield had shed 2bps to 0.29%, the 10-year yield had lost 7bps to 0.91% while the 20-year yield finished 8bps lower at 1.49%.
In the cash futures market, expectations of a change in the actual cash rate remained fairly stable. By the end of the day, contracts implied the cash rate would remain in a range of 0.11% to 0.12% through to the latter part of 2021.
ANZ economist Adelaide Timbrell said the solid result “built on the strength of June and reflected improved economic conditions and access to housing inspections in the previous months since lending occurs at settlement.”
In dollar terms, total loan approvals excluding refinancing increased by 8.9% over the month. The rise was greater than the 2.0% which had been generally expected and it built on June’s 6.4% increase after revisions. On a year-on-year basis, total approvals excluding refinancing increased by 11.8%, an acceleration from the previous month’s comparable figure of +4.7%.