Interest rate increases cool demand from first-time buyers
(SYDNEY) Australian home loan approvals fell in April for a seventh straight month, adding to evidence that the Group of 20's most aggressive round of interest rate increases has cooled demand among first-time buyers.
The number of loans granted to build or buy houses and apartments slipped 1.8 per cent to 47,669 from March, when they declined a revised 2.9 per cent, the statistics bureau said in Sydney yesterday. The median estimate of 20 economists surveyed by Bloomberg News was for a 2 per cent drop.
Plunging housing finance approvals may cool the nation's property market, which surged 20 per cent in the 12 months through March 31.
Yesterday's report may also prompt central bank governor Glenn Stevens to keep the benchmark interest rate unchanged in July for a second month after boosting the rate six times between October and May. He described monetary policy last week as 'appropriate for the near term'.
'Housing finance demand has moderated considerably,' Bill Evans, chief economist at Westpac Banking Corp in Sydney, said ahead of yesterday's report. 'Finance to first home buyers has retreated sharply,' he added.
Borrowing has tumbled since the start of the fourth quarter after Prime Minister Kevin Rudd's government began reducing A$21,000 (S$24,425) grants to first-time buyers of newly built dwellings. Those grants were lowered in two steps to A$7,000 on Jan 1.
First-home buyers accounted for 16.3 per cent of dwellings that were financed in April, up from 15.9 per cent in March and compared to 28.1 per cent in April 2009, the statistics bureau said yesterday.
Mr Stevens and his board increased Australia's overnight cash rate target by 150 basis points between October and last month to 4.5 per cent.
The increases have led to signs of cooling Australia's economy, which skirted last year's global recession, stoked by government stimulus spending and a rebound in the property market. Gross domestic product growth slowed to 0.5 per cent in the first quarter from the previous three months, when it jumped 1.1 per cent, a report showed last week. A report published yesterday by Westpac Banking Corp showed consumer confidence fell in June for a third straight month.
The total value of home loans rose 0.8 per cent to A$21.7 billion in April, yesterday's report showed.
The value of lending to owner-occupiers advanced 0.6 per cent. The value of loans to investors gained 1.3 per cent. -- Bloomberg
Source: Business Times, 10 Jun 2010
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