A dip in new home loan approvals in January will not nudge the Reserve Bank of Australia (RBA) in the direction of lower interest rates.
The number of home loan approvals fell by 1.2 per cent, seasonally adjusted, in January, the Australian Bureau of Statistics (ABS) said on Tuesday.
The fall ended a nine-month series of rises.
In dollar terms, home loan approvals actually rose marginally, by 0.1 per cent, but lending to investors fell by 7.1 per cent, almost completely reversing a rise in December.
As a result, total lending – to homebuyers and investors combined – was down by 2.3 per cent in January after slightly bigger rises in the previous two months.
It seems plausible that the fall, following rises in November and December were encouraged by the RBA’s interest rate cuts in those months, as well as by the effect of rate-cut speculation ahead of those decisions.
If so, then the effect was short-lived.
The subsequent decisions to leave the cash rate steady at 4.25 per cent in February and March, after the RBA board’s traditional holiday break in January, might keep the lid on demand for a while yet.
The ABS trend measures show the number of home loans rising at 0.8 per cent per month, with the value of lending, including investor loans, heading up at 0.6 per cent per month.
That implies some ongoing support for the housing market, but perhaps not enough to stimulate much of an increase, if any, in demand for new housing.
The value of loans which can be identified as applying to new housing – either newly constructed or yet to be built – fell by 12.1 per cent in seasonally adjusted terms in January.
That reversed a similar-sized rise in December and bent the bureau’s trend measure down. So, it is now heading lower, albeit very gradually.
Compared with a year earlier, the number of home loans was up by 10.1 per cent and their value was up by 8.1 per cent, meaning the average home loan size fell by just over two per cent.
Aside from refinancing transactions, the average size of a loan was down by three per cent, at $313,600, in January 2012 compared with $338,600 a year earlier.
That is consistent with other data showing housing prices stagnating, an environment where the price of buying a home is falling relative to the cost of building one, reducing the incentive to build.
The RBA will not be too worried about this. The Reserve Bank is well known to view weakness in other sectors on the economy as helping to “make room” for growth in the mining sector.
