Weak housing finance figures appear to confirm that consumers are still nervous about taking on new debt, preferring instead to pay down existing debt.

The number of home loans approved in April rose 0.8 per cent, the Australian Bureau of Statistics said on Tuesday, well below market expectations of the two per cent rise.

Total housing finance by value fell 0.2 per cent in April, but there was a 1.1 per cent rise in investment housing.

Commonwealth Bank senior economist Michael Workman says the figures are still a bit weak.

“The general tone of the data is for a pretty modest upswing in loans by value and the number of loans,” he said.

“Its pretty much in line with the soft consumer confidence numbers at the moment.

“In answer to questions consumers are saying it’s a good time to buy a dwelling, they’re pretty modest at committing themselves to borrowing.”

Mr Workman said there was hardly any growth in the number of new home buyers taking out loans, probably because most government assistance programs have ended.

He said the growth in the number of people trading up to more expensive housing appears to be restrained because of uncertainty about employment.

“The tendency is still for people to pay down existing debt rather than take on new debt.”

Mr Workman says the housing finance figures would add to the case for two more cash rate cuts by the Reserve Bank of Australia before the end of 2013.

The number of new home loans approved in April was the highest in three and a half years.

Before the onset of the global financial crisis, new housing finance was consistently above 50,000 a month.

Loan Market corporate spokesperson Paul Smith said this is an indication that confidence is returning to the finance and property market.

“Growth like this is encouraging as it demonstrates that confidence is returning to the property and finance markets, he said.

“The RBA rate cut in May and the increased competition between lenders during this period should see another record set in May’s ABS data.”