Daily Commentary BY THE CURVE TEAM –

New Finance Gains Continue

2nd of February, 2021

Housing finance approvals continue to gain strongly even as outstanding credit growth remains subdued.

Following the release of credit growth for December on Friday, housing finance approvals for December were released yesterday. Owner occupied approvals were up 8.7% and investor approvals up 8.2%, leaving overall approvals 8.6% higher for the month.

New loans to first home buyer owner occupiers were up 9.3% for the month and 56.6% for the year. This is indicative of the impact that the governments homebuilder grants have had and $15 000 grants are still available until the middle of the year.

Refinancing is part of the story. For the month, refinancing was up 10.3% for the month and 9% for the year. Nonetheless, approvals have picked up strongly, especially from the pandemic lows.

In contrast to strong approvals is sluggish credit growth. The 0.3% gain for December was the strongest since March, which is indicative of the sluggishness of overall credit growth.

Low interest rates, despite contributing to strong approvals, is also leading to amortisation of existing loans. Business and personal lending has also taken a hit since covid.

Today, we hear from the RBA for the first time since December. Although no change is expected, their updated view and any hint of further easing will be of interest.

Josh Stewart

Associate - Money Markets