Banks rejoice: Mortgages back to pre-COVID levels

This is unlike any other recession. Australians are cashed up and pumped to buy real estate.

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The volume of approved home loans in July had jumped back to pre-COVID-19 levels, in a major boost for banks.

In a trend counter-intuitive to the recession, Finder analysis of ABS data showed 28,322 mortgages were approved in July. 

As a comparison, 26,687 mortgages got the green light in March, before the pandemic really started to strangle the economy.

The numbers are encouraging for the fortunes of ASX-listed banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking GrpLtd (ASX: ANZ).

Month Total value Number of loan approvals
January 2020 $12.1 billion 24,109
February $11 billion 23,090
March $13.2 billion 26,687
April $12.1 billion 23,638
May $11.5 billion 22,941
June $12.5 billion 25,713
July $13.7 billion 28,322
Source: Finder analysis of ABS data, table created by author

The mortgage industry also got a huge boost this week when the government turned off responsible lending rules to inject more credit into the economy.

The revival shows this recession is indeed very different to the usual downturn.

Despite high unemployment, government support has meant Australians on average have more income. And this money has been saved, rather than spent.

"There are hundreds of Aussies with a deposit saved, watching properties and the housing market and ready to strike," said Finder insights manager Graham Cooke.

"The full economic impact of COVID-19 has yet to be realised, but Aussies are unshakable in their love of housing."

Australians say now is a good time to buy 

It's not just investors and veterans getting in. More than 11,000 first home buyers entered the market in July, which is 20% up from May.

Finder's consumer sentiment index also showed 59% of Australians think now is an ideal time to buy real estate. This is way up on 54% in February and 52% in March.

"Judging by the surge in activity, plenty of Aussies are fired up about property again," Cooke said.

"The housing market is also benefiting from the pent-up demand released with the restarting of auctions and inspections in several places."

Lending to owner-occupiers would grow even further when states relax border restrictions, according to Cooke.

"Think of all the interstate relocations that normally happen before a new school year starts that have been stifled."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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