Approvals surprised on the upside. Actually they shocked the pants off everyone.
So we got word last week that mortgage approvals are booming.
No. Literally. BOOMING!
This is a count of how many people took out a mortgage in August. And the number was up a tub-thumping 12.6% in the month.
And that’s not a Covid rebound. Approvals are now up 30% over the past three months, and incredibly, up a full 9% on their pre-covid levels.
Check out the charts. They’re amazing.
So you can see here the surge in new mortgages – this excludes refinancing, so it’s just new lending. It remains driven by owner-occupiers, with investor lending continuing to lag the rebound.
That said, investor mortgages were still up an impressive 9% in the month.
Looking at the annual growth rates help us cut through some of the choppiness, but across the board the data is pointing to some very strong property market activity. Total new mortgage commitments are up by 19.3%, with owner-occupier mortgages surging by 29.2% but investor mortgages falling 4.6%:
When you dig into the data, you can see that the strong result in owner-occupiers has been driven by first home buyers. FHB mortgages rocketed by an incredible 18.4% in the month of August, with their share of total mortgages at 23.6% – the highest level since the GFC.
This strong showing of first home buyers is perhaps not surprising given the government incentives on offer right now – particularly home builder and the First Home Buyer Deposit Scheme. (Finance for construction was up a huge 22% in the month.)
At any rate, the finance data are unmistakably positive for the property market. Actually that’s probably an understatement.
It points to a property market that is running very hot. It hasn’t shown up in the price data just yet, but it definitely will soon.
There are still a few reasons to be cautious about pegging too much on this result. The monthly data can be choppy, and this data from August predates the lockdown in Melbourne.
Approvals in Melbourne moved in line with the national averages, which surely won’t be the case next month.
So we can probably expect some pull back in September.
Never the less, the data is strong, and much stronger than most people were expecting.
Even me.
I was expecting the market to come bouncing back and bouncing back pretty quickly. But the speed and the suddenness of this recovery has even taken me by surprise.
So, I’m not sure.
If you were banking on snagging a bargain this cycle, you’re time might be running out.
DB.