Summary: Value of loan commitments down 1.4% in August; 20.7% lower than August 2021; “more weakening to come”; “some interesting ‘wrinkles’ from first-home buyers, construction-related finance approvals”; value of owner-occupier loan approvals down 2.7%, investor approvals down 4.8%; number of home loan approvals down 0.4%.
The number and value of 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 elevated levels in 2021.
August’s housing finance figures have now been released and total loan approvals excluding refinancing decreased by 3.4% In dollar terms over the month, slightly higher than the 4.0% fall which had been generally expected and above July’s -8.5%. On a year-on-year basis, total approvals excluding refinancing fell by 12.5%, down from the previous month’s comparable figure of -11.3%.
“Approvals are now 19.6% below their peak at the start of the year. The latest data on turnover and prices, available up to September, points to more weakening to come,” said Westpac senior economist Matthew Hassan.
The figures were released on the same day as the RBA’s smaller-than-expected 25bps increase of its cash rate target and Commonwealth Government bond yields fell significantly. By the close of business, the 3-year ACGB yield had shed 34bps to 3.34%, the 10-year yield had lost 20bps to 3.75% while the 20-year yield finished 13bps lower at 4.04%.
Hassan noted “some interesting ‘wrinkles’ around first-home buyers and construction-related finance approvals.” Loan approvals for first-home buyers rose by 7.0% while approvals for the purchase of newly built dwellings fell by 11.3%.
The total value of owner-occupier loan commitments excluding refinancing decreased by 2.7%, up from July’s -7.0%. On an annual basis, owner-occupier loan commitments were 15.1% lower than in August 2021, below July’s comparable figure of -7.0%.
The total value of investor commitments excluding refinancing arrangements fell by 4.8%. The decline followed an 11.2% decrease in July, taking the growth rate over the previous 12 months to -6.4%, down from zero.
The total number of loan commitments (excluding refinancing loans) to owner-occupiers decreased by 0.4% to 29303. The decline was a smaller one than July’s 5.8% fall and the annual contraction rate slowed slightly, from -21.4% to -19.2%.
