Rate cuts less likely as housing picks up
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SYDNEY, Nov 12 AAP
November 12 2012, 2:46PM
Australians are starting to take advantage of lower interest rates by getting back into the property market.
But economists say signs of improvement in the housing sector could persuade the Reserve Bank of Australia to keep the cash rate on hold when its board meets next in December.
The number of owner-occupied home loans approved in September rose 0.9 per cent to 46,395, its highest level since January, the Australian Bureau of Statistics said on Monday.
That followed a 2.1 per cent rise in August.
The value of housing loans taken out in September, including loans to investors, rose 3.8 per cent to $21.203 billion.
St George chief economist Hans Kunnen said the figures suggested recent interest rate cuts were beginning to have a positive effect on the market.
Since November 2011 the RBA has cut the cash rate 1.5 percentage points to 3.25 per cent.
"When you see investors involved and when you see lending for new homes picking up, you start to get the inkling that people are starting to overcome their conservatism and are thankful for the cuts in rates that the Reserve Bank has delivered."
Mr Kunnen said the figures also suggested the RBA would be unlikely to cut the cash rate in December.
"If they didn't cut in November and they get a result like this now, you would have to think, well why would you (cut the cash rate) when things are on the pick up?"
"This result in itself would lean towards the RBA saying: we'll leave rates where they are because the past cuts seem to be working."
The futures market is pricing in a 60 per cent likelihood of an interest rate cut in December.
CommSec chief economist Craig James said the housing figures showed home loans had risen more in value than in number.
"That suggests that there's increased confidence by borrowers, or that home prices are edging a little higher."
The figures also showed a 6.3 per cent fall in construction of dwellings, which came as a disappointment to the housing construction sector.
Master Builders Australia chief executive Wilhelm Harnisch said the RBA needed to do more to support the sector.
"Clearly, the RBA rate cuts to date have not been sufficient to offset the lack of confidence of potential new home buyers.
"The figures reinforce widespread calls for further interest rate cuts and soon," Mr Harnisch said.
By Evan Schwarten and Caroline Smith