Housing Finance – The Number Of Home Loan Approvals For Owner Occupiers Fell 2.1 Percent In August, Surpassing Market Expectations Of A 1.4 Percent Fall

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After several owner-occupier mortgages approved, the outlook for Australia’s housing market than thought previously could be weaker, by far more than what economists had expected. Surpassing market expectations of a 1.4 percent fall, home loan approvals for owner occupiers fell 2.1 percent in August 2018 from July 2018. As per the data from the Australian Bureau of Statistics, for the month, down at $30.667 billion, there was a 2.1 percent decline in the value of total housing finance. The house prices continued the yearlong withdrawal, while the economist surveyed and announced that it had expected a 1% fall.

For owner-occupiers the value of new home loan approvals was down 2.7 percent, while the value of investor loans was down 1.1 percent. Recent declines in home values are likely to continue, with property prices tending to follow the contraction or expansion of credit availability, the fall in loan approvals suggests. Ben K Jarman, JP Morgan rate strategist said, “as the combination of falling house prices and stricter lending standards weigh on lending behavior. With building approvals, house prices and auction clearance rates all falling, housing finance data verifies the other housing-related data flow. Led by weakness in Melbourne and Sydney, over the past year house prices have been sliding. Concerns around flat wages growth and record household debt in recent years, has led to stricter credit to fund which prompted a restriction the riskier lending for buying of houses. 

The worst since 2010, the weakness with the 14 percent annual decline in approvals, Daniel Gradwell, ANZ senior economist, said it was not surprising and was already factored into the bank’s housing forecasts. On the same time a year ago, capital city home prices are down 4.1 percent, CoreLogic data this week showed. Indicating risks to the financial system remain low and manageable, the RBA’s six-monthly Financial Stability Review downplayed risks that what can worsen the housing slowdown currently is an excessive tightening in lending standards. As the banking regulator continues to enforce tougher criteria for mortgage lending Australia’s housing market is facing a strict regime.

Officials of RBA seem very comfortable on lending standards, were subjected to the bulk of the heavy lifting the fact that house prices have declined in a gradual and an orderly fashion informs. Particularly given recent amendments to house price data show weakness intensifying in the last few months, it seems a little early to make this call. The Australian dollar fell from 71.27 US cents just before the release to 71.21 US cents and was slow to react.

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