Mortgage approvals surge in ‘last hurrah’ for housing

The Australian Bureau of Statistics (ABS) has released its latest Lending Indicators data, reporting an 8.9 per cent spike (seasonally adjusted) in total value of housing finance commitments over the month of July to $18.9 billion.

The month-on-month improvement was underpinned by a 10.7 per cent surge in the value of owner-occupied mortgage approvals ($14.3 billion) – the sharpest monthly improvement on record.

Owner-occupied growth was supported by strong first home buyers (FHB) activity, with the value of FHB loans rising 10.6 per cent to $4.2 billion.

Investor settlements also increased, albeit less pronounced, rising 3.5 per cent to $4.5 billion.

ABS’ head of finance and wealth, Amanda Seneviratne, attributed the overall spike in home lending volumes to an easing of social distancing restrictions in most states and territories in June and July.  

But according to Minister for Housing Michael Sukkar, the improvement also reflected the stimulatory impact of the federal government’s $688-million HomeBuilder scheme, with the value of construction loans increasing 8.3 per cent to $1.7 billion.

“[The ABS] data shows the Morrison government’s HomeBuilder program is delivering on its goal of keeping Australia’s construction pipeline flowing to protect tradies’ jobs,” Minister Sukkar said.

Master Builders Australia CEO Denita Wawn agreed, partly attributing the lending growth to the “highly effective impact of HomeBuilder in activating demand”.

“While the purchase of established homes are obviously not eligible for HomeBuilder, lending in this part of the loan market still jumped substantially during July,” he said.

“This is another encouraging sign, showing that HomeBuilder is starting to help strengthen sentiment even in those areas which it does not directly target.”

However, according to ANZ Research, the monthly result would not signal the start of a revival in the housing market, given the latest wave of lockdown measures in Victoria.

“[This] is by no means the start of a trend,” the research group noted.

“Rather, it is more likely a last hurrah before stage 4 lockdowns in Melbourne hit households’ ability and confidence to borrow.”

ANZ Research said the effect of Victoria’s restrictions on broader economic sentiment would weigh on transaction activity.

“The weakened labour market and economic outlook as a result of the second wave of COVID-19 is likely to put downward pressure on prices, making many sellers reluctant to put their properties on the market in the coming months,” the research group added.

The group also noted that home loan deferral extensions would also “push down the availability of stock” by “lessening forced selling”.

Mortgage deferrals and COVID-related repayment relief measures are due to expire by 31 March 2021.  

[Related: Bank profits sink despite home lending surge]