Resurgence of home loan approvals moving to “fully-fledged boom”

Summary: Home loan approvals significantly increase in number in January; owner-occupier loans outweighing investor loans by nearly 2:1; value of loan commitments accelerate; resurgence moving quickly into “fully-fledged boom”.

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 provided an indication the trend had finished but subsequent figures pushed the annual rate of increases back into positive territory.

January’s housing finance figures have now been released and the total number of loan commitments (excluding refinancing loans) to owner-occupiers increased by 12.3%. The gain came after a 7.1% rise in December after revisions and, on an annual basis, the rate of growth increased from December’s figure of 33.1% to 48.0%.

“Owner-occupier lending continues to drive the recovery, with investors down to 38% of new loans, the lowest since 2009, despite rising momentum in investor lending,” said ANZ economist Adelaide Timbrell.

The figures were released on the same day as a swag of local economic reports, including the Melbourne Institute’s Inflation Gauge and ANZ’s latest Job Ads survey. Commonwealth bond yields fell significantly on the day, reversing some of the previous week’s rises and following large falls of US Treasury yields on Friday night. By the close of business, the 3-year ACGB yield had shed 9bps to 0.28%, the 10-year yield had dropped 24bps to 1.67% and the 20-year yield finished 21bps to 2.36%.

In dollar terms, total loan approvals excluding refinancing increased by 10.5% over the month, up from December’s 8.6% increase after revisions. On a year-on-year basis, total approvals excluding refinancing increased by 44.3%, an acceleration from the previous month’s comparable figure of 31.2%.

The total value of owner-occupier loan commitments excluding refinancing increased by 10.9%, more than December’s revised figure of 8.7%. On an annual basis, owner-occupier loan commitments were 52.3% higher than in January 2020, whereas December’s annual growth figure was 38.9%.