The July 2019 housing finance data released by the Australian Bureau of Statistics (ABS) shows that demand for mortgages is starting to rise.
Of course, dwelling values in July were unchanged nationally and there were rises recorded for the second successive month in Sydney and Melbourne with an increase also in Brisbane.
There were clear signs in the market at this time that mortgage demand was lifting and today’s data confirms that.
In July 2019, there was $26.5 billion worth of housing finance commitments, marking the second consecutive month of increases.
The $26.5 billion was 5.2% higher over the month, which was the largest monthly increase since March 2015.
Despite the monthly increase in lending, year-on-year it was -9.6% lower.
The $26.5 billion was split between $19.3 billion worth of commitments to owner- occupiers and $7.2 billion for investors.
For both owner-occupiers and investors it was the second successive months in which the value of lending has increased.
The $19.3 billion worth of commitments to owner-occupiers was the greatest value since November 2018 and the $7.2 billion in commitments to investors was the greatest since December 2018.
Breaking the data out by new mortgage lending and refinances you can see that most of the increase in lending is coming from new lending rather than refinances of existing loans.
For owner-occupiers, the $19.3 billion was split between $13.3 billion for new lending and $6.1 billion worth of refinances.
For both new and refinances to owner owner-occupier lending it was the largest value of lending since November 2018 however, new mortgage lending is up 9.5% from the recent low and refinances are 6.3% higher.
For investors, the $7.2 billion worth of commitments is split between $4.6 billion for new lending and $2.5 billion for refinances of existing mortgages.
The value of lending to investors for new mortgages is up 5.7% from its recent low while refinances are 4.3% higher.
The number and share of owner-occupier mortgages going to first home buyers is also increasing.
Excluding refinances, there were 10,136 mortgage commitments by first home buyers, which represented 29.4% of all owner-occupier finance commitments (excluding refinances).
The 10,136 commitments to first home buyers was the most since November 2018 and the share of commitments to first home buyers was the greatest since January 2012.
The data points to first home buyers increasing their participation which isn’t a great surprise given that over recent years dwelling values have fallen, the housing market value falls have now bottomed, interest rates were reduced in both June and July and borrowing capacities have been increased with the removal of previous lending restrictions.
The consecutive rises in the value of mortgage lending follows the theme whereby national dwelling values have also been increasing since the middle of May 2019.
Since July 2019, there has been an acceleration in the rate of growth in Sydney and Melbourne with national dwelling values also rising in August for the first time since late 2017.
CoreLogic’s valuation metadata has now recorded its highest annual growth rate since early 2017.
While that won’t necessarily all translate into new mortgages it does show that interest in the housing market is rising.
Although it is now early in spring, auction clearance rates are continuing to rise as is the volume of stock available for sale and at the same time lenders are offering attractive mortgage rates for borrowers.
Given all of this, we would expect that demand for mortgages will continue to climb over the coming months.