Summary: Value of loan commitments up 0.6% in September, less than expected; 4.7% lower than September 2022; Westpac: point to clear tensions in the sector; ACGB yields drop; rate-rise expectations soften; ANZ: peak of competition for debt may have passed; value of owner-occupier loan approvals down 0.1%; investor approvals up 2.0%; number of owner-occupier home loan approvals flat.
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. However, there has been a considerable pullback since then, although the total value of new loans is still elevated by historical standards.
September’s housing finance figures have now been released and total loan approvals excluding refinancing increased by 0.6% In dollar terms over the month, less than the 1.3% rise which had been generally expected as well as August’s 2.4% gain. On a year-on-year basis, total approvals excluding refinancing fell by 4.7%, up from the previous month’s comparable figure of -9.3%.
“All up, this week’s batch of housing updates point to clear tensions in the sector; prices seeing a sustained rise but volumes and new building remain much patchier,” said Westpac senior economist Matthew Hassan.
Commonwealth Government bond yields dropped materially on the day, following similar overnight movements of US Treasury yields. By the close of business, the 3-year ACGB yield had shed 11bps to 4.33% while 10-year and 20-year yields both finished 16bps lower at 4.81% and 5.14% respectively.
In the cash futures market, expectations regarding further rate rises softened. At the end of the day, contracts implied the cash rate would increase from the current rate of 4.07% and average 4.195% through November, 4.285% in December and 4.365% in February. May 2024 contracts implied a 4.465% average cash rate while August 2024 contracts implied 4.47%, 40bps more than the current rate.
“Lack of supply is an important suppressor of sales volumes and credit growth, but it is also creating momentum in housing prices, which rose 0.9% in October and 0.7% in September,” said ANZ senior economist Adelaide Timbrell. “External refinancing for housing dipped to its lowest level since late 2022, suggesting the peak of competition for debt may have passed.”
The total value of owner-occupier loan commitments excluding refinancing slipped by 0.1%, in contrast with August’s 2.8% rise. On an annual basis, owner-occupier loan commitments were 8.4% lower than in September 2022, above August’s comparable figure of -12.5%.
The total value of investor commitments excluding refinancing increased by 2.0%. The rise followed a 1.7% gain in August, taking the growth rate over the previous 12 months from -2.9% to 2.6%.
The total number of loan commitments to owner-occupiers excluding refinancing were effectively flat at 25,359 on a seasonally adjusted basis. The result was lower than August’s 2.4% increase and the annual contraction rate slowed from 12.4% after revisions to 8.3%.
