The number of home loans approved fell the most in five months in July, underscoring ongoing weakness in the nation’s housing sector.
The number of loans dropped 1 per cent to 44,804, lower than a downwardly revised 45,278 in June, the Australian Bureau of Statistics reported. Economists had expected housing finance commitments to be flat in July.
Rates easeMeanwhile, the big banks have been cutting their fixed home-loan rates to the lowest levels in more than three years.
Commonwealth Bank dropped its fixed rates last week by up to 0.4 percentage points on new one-, three-, four- and five-year fixed-rate home loans. National Australia Bank slashed its two-, four- and five-year fixed rates by up to 20 basis points.
From Wednesday, Westpac will cut its one-, two-, three- and four-year fixed mortgage rates by between 5 and 50 basis points
Financial markets are currently gauging the chance of an interest rate by the Reserve Bank in October as a bit higher than an even-money prospect. Investors are still tipping almost a full percentage point cut in the cash rate to 2.5 per cent in 12 months’ time, according to investment bank Credit Suisse.
No sign of strength
The weakness in the loan market follows recent news that new home sales plunged to their second-lowest level in 11 years in July, ending three months of gains.
‘‘It’s consistent with the idea that says the housing market’s going sideways,’’ NAB group chief economist Alan Oster said. ‘‘It’s certainly not showing any signs of strength.’’
‘‘Building and purchasing of new housing is an area of weakness at the moment,’’ Mr Oster said.
The Housing Industry Association’s new home sales report showed a 5.6 per cent fall to 5682 homes sold in July, following a rise of 2.8 per cent in June.
But other signals suggest there has been some resilience in the housing market since July.
Clearance rates in both of Australia’s largest residential markets, Sydney and Melbourne, remain above the 60 per cent mark, or several percentage points higher than the same time last year.
Online residential property listings have also risen. They were up by 1.5 per cent in August, to a total of 373,510, according to SQM Research.
That increase will provide more choice for home hunters but may also douse the chance of a recovery in prices if stocks prove excessive during the popular Spring auction season.
Story Source: BusinessDay with AAP, Reuters
