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Mortgage approval ‘backlog’ drives slump in volumes

“Operational” lags experienced by lenders have contributed to a sharp decline in home loan volumes across the mortgage market, new ABS data has revealed.

According to the latest Lending Indicators data from the Australian Bureau of Statistics (ABS), the value of home loan approvals slipped 4.8 per cent to $18.5 billion (seasonally adjusted terms) in April – the sharpest decline since May 2015.

The result was driven by a 5 per cent fall in owner-occupied lending to $13.7 billion, while investor lending fell 4.2 per cent to $4.8 billion.

ABS chief economist Bruce Hockman partly attributed the decline in home loan approvals to a lag in turnaround times off the back of an influx in mortgage enquiries in March.   

“COVID-19 operational impacts experienced by some lending institutions resulted in a backlog of March housing loan applications being processed in April, which moderated the April fall in loan commitments,” he said.


Chief economist at the Housing Industry Association (HIA) Tim Reardon agreed: “Home loans approved in April largely reflect loan applications initiated in previous months.

“The modest decline in finance approvals in April reflects processing delays due to COVID.”

This is reflected in Momentum Intelligence’s Broker Pulse figures, which have identified sharp increases in assessment times for both ANZ and Westpac over the past few months.

Also reflecting on the ABS data, ANZ Research noted that it expects home lending volumes “to be soft for some time”, with both lenders and households reducing their risk appetites.

The group added that subdued demand for housing credit would “flow into house prices” and a “deteriorating construction outlook”, which would be “slightly offset” by the federal government’s new HomeBuilder scheme.

However, BIS Oxford economist Maree Kilroy is expecting an improvement in home lending volumes in the medium term, primarily in response to an easing of COVID-19 restrictions.

“The easing of restrictions on live auctions and open house inspections will see new housing loans gradually recover over the subsequent months,” she said.

Ms Kilroy added that the HomeBuilder scheme would also contribute to an uptick in demand for new construction loans, but noted that the scheme’s contribution to growth would not be evident until the backend of 2020.  

[Related: HomeBuilder could ‘intensify’ slide in property prices]

Mortgage approval ‘backlog’ drives slump in volumes

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