Latest housing finance approvals at well below expectations

Latest housing finance approvals at well below expectations
Latest housing finance approvals at well below expectations

The September ABS housing finance approvals data came in well below expectations with the number of approvals to owner occupiers falling 2.3% vs consensus forecast of a 2% gain.

According to the latest housing finance data from the Australian Bureau of Statistics, 55,812 home loans were approved throughout September – down from 57,137 the month prior. 

The value of investor loan approvals also fell sharply, down 6.3%, Westpac noted.

In both cases, approvals were coming off surprisingly strong gains in August, owner occupier approvals up 1.5% and the value of investor loans up 4.8%, it added.

The ANZ noted housing finance commitments in September recorded the largest decline in two years, and falling auction results suggest the market has further to cool through the remainder of 2017 and into 2018.

"We believe the regulator/RBA and state governments will be encouraged by the slowdown in investor borrowing and improved access to the housing market for first home buyers, respectively," the ANZ noted.

Matthew Hassan at Westpac noted more generally, both owner occupier and investor finance approvals have been holding up much better than wider market measures in 2017 – the slowdown in Australia’s housing market has been more muted in the finance data.

"This largely reflects the nature of the macro-prudential measures introduced in late March which had a heavier impact on investor segments and would have generated significant ‘switching’ between ‘interest only’ and ‘principal and interest loan products’.

"Investor loan figures include refinance and hence would have been boosted by existing borrowers switching between loans (although technically this should only cover those switching between lenders)."

The ABS detail showed a broad based pull back with weakness in construction related approvals as well.

By state, Victoria was the only major state to record a rise in owner occupier approvals.

First home buyer approvals also declined suggesting the boost from recent increases in state government assistance may already be waning.

"Overall, the update brings the finance approval data more into line with the clear slowing signal already evident from turnover, auction markets and prices," Hassan comented.

"The weakness in owner occupier loan approvals bears closer analysis.

"For investors, a further pull back is likely in the months ahead depending on the extent to which loan activity has been supported by refinancing."

The 2.3% drop in home loan demand "was largely expected,” Mortgage Choice chief executive officer John Flavell said. 

“The fact is, interest rates have now been sitting at historically low levels for over 12 months.

"When interest rates first started to fall, we saw a spike in the number of borrowers looking to get into the market and take advantage of the low rate environment. 

“But, given that rates have been so low for so long, it is only natural that we would eventually see a slight reduction in the level of home loan demand.

“That said, it is important to note that home loan demand is still high by 
long term standards. While we have seen some of the heat come out of the market, the market certainly hasn’t collapsed. 

“Quite the opposite. Over the last three months, more than 55,000 home loans were approved on a monthly basis. The last time home loan demand was this strong for this long was over a year ago.”


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