Home loan rise signals recovery
|AAP | SMH | 11 July, 2011
A 4.4 per cent rise in home loans in May suggests the housing market is starting to pick up after the slowdown earlier in the year following November’s rate rise.
The number of home loans approved in May rose 4.4 per cent, to a seasonally adjusted 49,437, official data shows. Economists’ forecasts had centred on a 4.5 per cent rise in housing finance commitments for the month.
The Australian Bureau of Statistics said total housing finance by value rose 2.9 per cent in May, seasonally adjusted, to $20.497 billion.
ANZ economist David Cannington said May’s figure meant there had been two months of fairly positive data after the sharp downturn early in 2011.
‘‘The initial softening after the November rate hike is fading out of the market,’’ he said.
He added that the numbers suggested investors were coming back to the market after the drop off earlier in the year.
Mr Cannington also said bank lending had returned to be the highest in about two years, suggesting a recovery from the global financial crisis.
Refinancing had also recovered. ‘‘Competition between banks, that’s made it attractive for mortgage holders to refinance,’’ he said.
ANZ had revised its outlook for interest rates and now didn’t expect a rate rise from the Reserve Bank of Australia until February.
‘‘That will be a boost for housing finance,’’ Mr Cannington said.
The RBA increased the overnight cash rate to 4.75 per cent last November.
ICAP senior economist Adam Carr said the second consecutive month of improvement supported the view the economy was on the path to recovery, after its first quarter disaster induced slowdown.
‘‘It suggests to me that the soft patch in Aussie economic growth was really just disaster distortions and the underlying momentum remains strong,’’ Mr Carr said. ‘‘The consensus view is that the soft patch was more fundamental than structural and I think the evidence is showing that that is not the case.’’
Mr Carr said he expected a ‘‘fairly strong second half’’ in which interest rates remained on hold.
‘‘I think that it is quite obvious the Reserve Bank is not going to be hiking rates while sentiment is so poisonous,’’ he said.