Summary: Value of loan commitments down 1.7% in May, contrasts with expected rise; 18.0% higher than May 2023; ANZ: lending still up 8.6% in 2024; ACGB yields down; rate-rise expectations soften; Westpac: does not alter wider narrative of price-led upswing; value of owner-occupier loan approvals down 2.0%; value of investor approvals down 1.3%; number of owner-occupier home loan approvals down 1.6%.
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.
May’s housing finance figures have now been released and total loan approvals excluding refinancing decreased by 1.7% In dollar terms over the month, in contrast with the 1.8% rise which had been generally expected as well as April’s 4.8% increase. On a year-on-year basis, total approvals excluding refinancing were 18.0% higher than May 2023, down from the previous month’s comparable figure of 24.9% after revisions.
“This is weaker than the market expected but comes after three months of growth, with lending up 8.6% so far in 2024,” said ANZ senior economist Blair Chapman. “Ongoing growth in lending in Western Australian and Queensland was not enough to overcome declines in most other states and territories in May.”
Commonwealth Government bond yields fell moderately on the day, lagging the larger falls of US Treasury yields on Friday night (AEST). By the close of business, 3-year and 10-year ACGB yields had both lost 4bps to 4.09% and 4.37% respectively while the 20-year yield finished 3bps lower at 4.70%.
Expectations regarding rate rises in the next twelve months softened by the end of the day. In the cash futures market, contracts implied the cash rate has some chance of rising above the current rate of 4.34% in the short-term, with an average of 4.395% in August and 4.46% in November. February 2025 contracts implied 4.435% while May 2025 contracts implied 4.335%, essentially in line with the current cash rate.
“Overall, the May update checks some of the strength seen over the last few months but does not alter the wider narrative of a price-led upswing,” said Westpac senior economist Matthew Hassan. “That said, moderating price gains and flattening turnover does appear to be taking some of the pace out of the upswing in the major eastern states.”
The total value of owner-occupier loan commitments excluding refinancing decreased by 2.0%, a partial reversing of April’s 4.5% rise. On an annual basis, owner-occupier loan commitments were 12.2% higher than in May 2023, down from April’s comparable figure of 19.1%.
The total value of investor commitments excluding refinancing decreased by 1.3%. The fall follows a 5.3% increase in April, taking the growth rate over the previous 12 months from 36.3% to 29.5%.
The total number of loan commitments to owner-occupiers excluding refinancing decreased by 1.6% to 26880 on a seasonally adjusted basis, once again contrasting with April’s 2.6% increase. The annual growth rate slowed from 8.9% after revisions to 3.3%.
