Summary: Value of loan commitments up 3.9% in July, above expectations; 26.5% higher than July 2023; ANZ: average size of new loans at record high; ACGB yields fall; rate-cut expectations firm; value of owner-occupier loan approvals up 2.9%; value of investor approvals up 5.4%; number of owner-occupier home loan approvals up 2.3%.
The number and value of home-loan approvals began to noticeably increase after the RBA reduced its cash rate target in a series of cuts beginning in mid-2019, 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 record highs in 2021. After a considerable pullback in 2022 both the value and number of approved loans resumed rising in 2023.
July’s housing finance figures have now been released and total loan approvals excluding refinancing increased by 3.9% In dollar terms over the month, greater than the 1.0% rise which had been generally expected and up from June’s downwardly-revised 1.0% increase. On a year-on-year basis, total approvals excluding refinancing were 26.5% higher than in July 2023, up from June’s comparable figure of 18.7%.
“The ABS noted that the rise in investor lending is ‘mostly because more loans are being approved, and is only partly driven by higher dwelling prices’,” said ANZ economist Sophia Angala. “That said, the average size of new loans, for investors and owner-occupiers, is at a record high.”
Commonwealth Government bond yields fell moderately on the day. By the close of business, the 3-year ACGB yield had lost 4bps to 3.49%. the 10-year yield had shed 5bps to 3.89% while the 20-year yield finished 3bps lower at 4.32%.
Expectations regarding rate cuts in the next twelve months firmed, with a February 2025 rate cut fully priced in. Cash futures contracts implied an average of 4.33% in September, 4.315% in October and 4.265% in November. February 2025 contracts implied 4.05%, May 2025 contracts implied 3.66% while August 2025 contracts implied 3.41%, 93bps less than the current cash rate.
The total value of owner-occupier loan commitments excluding refinancing increased by 2.9%, up from June’s 1.0% rise. On an annual basis, owner-occupier loan commitments were 21.4% higher than in July 2023, up from June’s comparable figure of 13.9%.
The total value of investor commitments excluding refinancing increased by 5.4%. The rise follows a 1.1% increase in June, taking the growth rate over the previous 12 months from 27.8% to 35.4%.
The total number of loan commitments to owner-occupiers excluding refinancing increased by 2.3% to 27356 on a seasonally adjusted basis, up from June’s 0.1% rise. The annual growth rate accelerated from 4.6% after revisions to 11.5%.
