Home loan approvals fall 1% in July: ABS

Larry SchlesingerDecember 8, 2020

The number of home loans approved for owner-occupiers fell 1% in July to 44,804 loans from 45,278 in June., according to the latest housing finance data released by the ABS today.

The monthly drop indicates that the RBA cash rate cuts of May and June have failed to stimulate the demand for new mortgages.

The fall in July home loan approvals was below the expectations of economists polled by Bloomberg last week, who expected no growth in mortgage approvals over July.

Total housing finance by value fell by 1.8%, seasonally adjusted, to $20.05 billion.

Westpac says the detail in the ABS figures reveal a "broadly flat result", with new lending (excluding refinancing) slipping 0.3% lower while refinancing fell by 2.4%.

"Lending for the purchase of new dwellings was down 6.8%, partially reversing an 8.9% rise last month. This segment (just 5% of the total) is volatile," writes Westpac.

"Finance for established dwellings rose 0.2% while finance for the construction of new dwellings continued to trend higher, pointing to an improvement in dwelling approvals. Finance to this segment rose 0.3% in the month, to be 10% higher than a year ago," says Westpac.

"Looking through the volatile seasonally adjusted growth since early 2011, this month’s data confirms housing market activity remains weighed down by weak home buyer sentiment and soft economic conditions in some parts of the economy," commented David Cannington and Dylan Eades from ANZ Research.

"Countering weak housing sales activity, housing finance should be moderately supported in the coming months by the May and June RBA rate cuts," they added.

On a state-by-state basis, the number of owner-occupier housing finance approvals fell in New South Wales (down 346, or 2.7%), Queensland (down 165, or 2%), Victoria (down 159, or 1.3%), South Australia (down 31, or 1%),Tasmania (down 23, or 3.1%) and the Australian Capital Territory (down 20, or 2.7%), while rises were recorded in Western Australia (up 118, or 1.8%) and the Northern Territory (up 27, or 8%).

Westpac says the Queensland result is disappointing and the falls in NSW and Victoria  reflect changes to state government stamp duty and bonus payments, which points to the likelihood of a "July let-down effect".

In original terms, the number of first-home buyer commitments as a percentage of total owner-occupied housing finance commitments rose to 19.2% in July 2012, from 18.5% in June 2012.

"First-home buyers are coming back to the market – although the profile has been distorted by changes to incentives. For the month, finance to FHBs rose 2.4%, to be up 19% on a year ago. Further gains are to be expected, as FHBs respond to improved housing affordability," says Westpac.

Between July 2012 and June 2012, the average loan size for first home buyers fell $600 to $291,400.

The average loan size for all owner-occupied housing commitments fell $1,100 to $300,500 for the same period.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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