Summary: Number of home loan approvals increase by 0.8% in May; “consistent with continued strong momentum in housing markets”; value of loan commitments up by 1.9%; pace over past 3 months points to further acceleration over the second half.
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 of 2020 provided an indication the trend had finished but subsequent figures pushed the annual rate of increases back into positive territory and then on elevated levels.
May’s housing finance figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers increased by 0.8%. The rise came after a 0.6% fall in April after revisions and, on an annual basis, the rate of growth increased from April’s figure of 59.0% to 76.8%.
“Overall the picture is consistent with continued strong momentum in housing markets and an expected switch towards investor-led gains,” said Westpac senior economist Matthew Hassan.
Commonwealth bond yields fell on the day, especially at the ultra-long end. By the close of business, 3-year and 10-year ACGB yield had each slipped 1bp to 0.43% and 1.49% respectively while the 20-year yield finished 7bps lower at 2.05%.
In dollar terms, total loan approvals excluding refinancing increased by 4.9% over the month, a larger increase than April’s 3.7% increase. On a year-on-year basis, total approvals excluding refinancing increased by 95.4%, an acceleration from the previous month’s comparable figure of 68.2%.
The total value of owner-occupier loan commitments excluding refinancing increased by 1.9%, down from April’s figure of 4.3%. On an annual basis, owner-occupier loan commitments were 88.4% higher than in May 2020, whereas April’s annual growth figure was 70.1%.