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 began to reduce its cash rate target in a series of cuts and both the number and value of mortgage approvals began to noticeably increase.
December’s housing finance commitment figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers increased by 3.5%, an improvement on November’s revised figure of -0.8%. On an annual basis, the growth rate accelerated from November’s revised figure of -8.7% to +3.5%.
ANZ economist Adelaide Timbrell said, “Improved sentiment in the property market, driven by easier credit, low interest rates and consistently strong price growth, is behind the continuing strength of mortgage demand.”
Although US Treasury bond yields had closed a little lower in overnight trading, local yields finished slightly higher. By the end of the day, yields on 3-year and 10-year ACGBs had each ticked up 1bp to 0.71% and 1.03% respectively while the 20-year yield finished 2bps higher at 1.43%.
Prices of cash futures contracts moved to reflect a softening of rate-cut expectations. The March contract implied a 7% chance of a 25bps rate cut, down from the previous day’s 11% while the April contract implied a 26% chance of another cut, down from 31%. May contracts implied a 48% chance but prices of the July contract almost fully factored in a 25bps cut.