Refinancing surge
There was an explosion in refinancing in May 2020, taking total lending to owner-occupiers up to record monthly highs.
This will effectively act as a rate cut (or perhaps two) for many of these borrowers.
But once you strip out the massive surge of 21,227 refinancing approvals there was the expected decline in housing lending, as the economy was largely shut back in May.
Activity was down pretty much everywhere, as you might reasonably expect.
First homebuyer transactions were...down.
And the average mortgage size also declined, although borrowing capacity for many borrowers has increased compared to 18 months ago thanks to the salvo of five interest rate cuts, and the average mortgage size was up by some +18 per cent from a year earlier.
In particular borrowers in Sydney and Melbourne have been flexing their extra borrowing capacity over the past year or so.
The wrap
Overall, once you strip out the huge rip in refinancing there was much less housing lending and transactional activity in May.
Housing prices have drifted a little lower since rolling over around the end of Q1 2020, but on much thinner volumes, and stock levels have fallen very sharply which has somewhat underpinned prices.
Naturally the Victorian government now opting for a fresh six-week lockdown is going to lead another wave of local business closures over July and August, which will bring its own downside risks for Melbourne.
Sydney, on the other hand, is now steadily reopening for business, and most other housing markets have been fairly flat through the COVID shutdown.
Of course the lending figures are, as always, old news, reflective of historic activity from the end of April to the end of May.
More timely indicators from the REA Group appear to be relatively upbeat.
