People are borrowing money for houses again because they are more confident interest rates won’t rise further, economists say.
The number of home loans approved in August rose 1.2 per cent from July, the fifth consecutive monthly rise, official figures show.
Economists’ forecasts had centred on a one per cent rise in housing finance commitments for the month.
JP Morgan economist Ben Jarman said the change in the interest rate outlook had helped the housing market.
The Reserve Bank of Australia (RBA) last raised the cash rate to 4.75 per cent in November last year, and money markets and economists had expected further increases sometime this year to slow the resource driven economy.
But the perception changed in the middle of the year when European sovereign debt problems worsened, with the money market and some economists now predicting rate cuts.
“In the last few months worth of data, the housing finance figures have benefited from the perception that the RBA won’t be doing much in the near term,” Mr Jarman said.
“These fading expectations are helping out and people are coming back and they are happy to take on new debt.”
The Australian Bureau of Statistics (ABS) said total housing finance by value rose 1.0 per cent in August to $20.8 billion.
“We’re kind of calling this a mini-rally, but don’t think that this is the start of a tear away in the housing market,” Mr Jarman said.
Mr Jarman said JP Morgan still expected the RBA to keep the cash rate at its current 4.75 per cent until at least the middle of 2012.
“You’ve got a lot uncertainty offshore counter-balancing the domestic inflationary situation here.”
ICAP senior economist Adam Carr said the August housing finance figure was a good result and continued a 13 per cent cumulative increase in lending since April.
“The pattern we’ve witnessed over the last year is that home lending is posting a dramatic improvement after a GFC (global financial crisis) induced slump, interrupted only by the floods and the disasters,” Mr Carr said.
“Now we’re back on track.”
He expected housing finance data to continue to be strong in the coming months, helped by low unemployment, financial conditions that were “not too tight”, growing incomes and falling lending rates.
In recent weeks, banks and other lenders have cut their fixed rate home loans.
Mr Carr said the housing finance data also highlighted why a cut in the RBA’s cash rate was not needed.
“That’s because retailing is accelerating, home lending is accelerating, approvals are accelerating and the unemployment rate is low.”
The only possibility was if the European debt crisis worsened dramatically, prompting the RBA to make emergency rate cuts of one percentage point or more, Mr Carr said.
