The number of mortgage loans in Australia has marked its first increase in eight months, as buyers looked beyond higher interest rates to wade back into the market.
According to Australian Bureau of Statistics (ABS), the number of home loan applications increased 1.9 percent last month, following a 1.8-percent drop in the previous month.
”It’s a pretty good number considering the weakness (already seen),” said Helen Kevans, an economist at JP Morgan. ”There are still a lot of factors weighing on home loans. We don’t expect this strength to be long-lasting.”
The increase was largely attributed to the investment loans, which increased 2.6 percent to $7.66 billion in May, said ABS. These loans were up 35 percent since the start of 2009.
The data last month was followed by another weak weekend on the property market in Australia’s major cities. Clearance rate in Sydney was below 50 percent, while Melbourne remained flat, with both capitals posting their lowest rates since December 2008.
Many economists had predicted that loan activity would remain unchanged in May, which was the last month the Reserve Bank raised its official interest rates to keep inflation pressures in check.
Activity in the housing sector has cooled since the First Home Owners Grant expired in 2009, and interest rates began to surge. New home loans have also fallen for seven months since October last year.
”It’s hard to see (that) demand for home loans will pick up this year given the environment of rising interest rates and the expiry of the incentives,” said Ms. Kevans.
Australia’s total housing finance by value increased 0.7 percent to $21.360 billion, seasonally adjusted, last month.