An improved September result for home lending in Australia indicate that home loans have stabilised, but the recent increase in interest rates may likely limit any further increases, according to economists.
According to the Australian Bureau of Statistics, Australian housing finance commitments for owner-occupied housing rose 1.3 percent in September, seasonally adjusted, to 48,333, while total housing finance by value jumped 1 percent in August, seasonally adjusted, to $20.386 billion.
Ben Jarman, an economist at JP Morgan, said the most recent straight monthly improvement in home loans is not surprising, given the time period when the Reserve Bank of Australia (RBA) had put interest rates on hold.
“We think home loans have basically stabilised and the upside from here is probably capped by those rising interest rates,” said Mr. Jarman. “We think those rate hike reprieves would have been particularly important for households."
The reserve bank raised the cash rates to 4.75 percent on November 2, during the bank’s board meeting.
Mr. Jarman noted that first-time home buyers continued to make up a low percentage of mortgages being taken out. “Clearly there is still a bit of a hangover from all the activity that happened in 2009, when all those buyers hit the ground over that period,” he said.
“But generally it seems in the last few months that investors and owner occupiers have filled that gap. The big test going forward is going to be rising interest rates, so the RBA hiking last week will obviously take some of the wind out of the sails here,” he added.
Many economists expect more increases in interest rates next year.
Adam Carr, an economist at ICAP, said the housing finance numbers are strong despite the recent increases.
“Interest rates are still around average levels,” he said. “Despite recent rate hikes, and despite the fact that we will get more rate hikes next year, the economic fundamentals support increased lending activity.”