Australia: Housing finance in line with expectations - Westpac

Matthew Hassan, Research Analyst at Westpac, notes that Australian owner occupier housing finance approvals up 1%, investor lending down 1.4.

Key Quotes

“The May housing finance data was largely in line with expectations. The number of owner occupier loans rise 1% vs market expectations of 1.5% (Westpac +1%). The value of investor loans declined 1.4% but were still up 8.8%yr.”

“Note that the this is the second monthly observation since APRA's macro prudential tightening announced in late March and associated increases in increase rates with larger rises for investor and 'interest only' loans.”

“Some of the rise in owner occupier loans is likely due to switching between investor and owner occupier loan products.”

“A lift in refinancing suggests we may be starting to see existing borrowers move from interest only to standard loans.”

“Total new owner occupier loans ex refi were down 0.1% in the month.”

“Due to these compositional effects, our main focus is on the value of investor loans and total value of loans.”

“These both look to have held up a bit better than expected in May with a mild 1.4% dip in the value of investor loan approvals and total ex refi flat at +0.1%.”

“Overall, the numbers tell us little about the extent of the slowdown following the macro-prudential tightening. Other, timelier indicators such as auction activity and price growth show a material slowdown coming through.”

“That may be confirmed by finance approvals in coming months but given the banks made a second round of loan rate increases in June a full picture is unlikely to emerge until much later in the year.”