Giving people access to home loans is crucial to the health of the overall economy. Not only does it support the property sector, but also gives construction companies incentive to build homes to meet demand.
As a result, the latest home lending figures from the Australian Bureau of Statistics (ABS) are likely to have proved disappointing for many, especially given the low cash rate environment. November data shows that on a seasonally adjusted basis, the number of loans approved for owner occupied housing declined 0.7 per cent from the previous month.
There was also a 2.6 per cent fall in home loans granted for the construction of new properties, but approvals for those applying for a mortgage to purchase new homes were up 1.3 per cent.
The Real Estate Institute of Australia (REIA) explained that the situation was disappointing across most of the country. REIA President Neville Sanders commented: “Decreases were recorded in all states and territories except for Victoria and the ACT. Tasmania had the biggest fall of 1.3 per cent. The largest increase was recorded in the ACT – up 1.2 per cent.”
Borrowers have benefited from an all-time low cash rate of 2.5 per cent since August 2013, so all eyes will be on the Reserve Bank of Australia (RBA) to see what its next decision will be. The board’s meeting is scheduled for February 3.
However, REIA believes there’s every chance a further cut to the official cash rate will be implemented in light of this latest approvals data and conditions in the wider economy.
Mr Sanders noted: “With moderating housing lending and GDP growth below trend, inflation well within the RBA’s target zone, the RBA board should be considering a cut in interest rates at its February meeting.”
A further cut to the cash rate could give people extra encouragement to apply for first home buyer loans and make those all-important initial steps onto the property ladder.
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