Drop due to higher mortgage rates and cuts in first-home buyer grants
Australian home-loan approvals fell in December after central bank Governor Glenn Stevens raised borrowing costs for a record third month.
The number of loans granted to build or buy houses and apartments dropped 5.5 per cent to 55,632 from November, when they declined a revised 6.1 per cent, the statistics bureau said in Sydney yesterday. The median estimate of 18 economists surveyed by Bloomberg was for a 5 per cent decline.
Mr Stevens unexpectedly left the benchmark interest rate unchanged last week at 3.75 per cent, saying information about the impact of his three previous increases is still limited. Consumer confidence fell this month, a report published yesterday by Westpac Banking Group showed.
‘The drop in demand for housing finance will owe much to higher mortgage rates and the phasing out of the expanded first-home buyer grants,’ Stephen Walters, an economist at JPMorgan Chase & Co in Sydney, said ahead of yesterday’s report.
Demand for home loans surged in the first half of 2009 after Prime Minister Kevin Rudd tripled grants to first-time buyers of new homes to A$21,000 (S$26,000), and the central bank cut borrowing costs to a half-century low of 3 per cent in April.
The government partially reduced those grants last quarter, before returning them to their original level of A$7,000 at the start of this year.
First-home buyers accounted for 21 per cent of dwellings that were financed in December, down from 22.1 per cent in November and a record 25.8 per cent in May, the statistics bureau said yesterday.
Mr Stevens and his board increased Australia’s benchmark lending rate three times from October to December as a rebound in exports to China by companies including BHP Billiton Ltd helped fuel the biggest four-month surge in hiring in more than three years.
Employers added 135,700 jobs between September and the end of 2009, driving down the unemployment rate in December to an eight-month low of 5.5 per cent.
Employers hired another 15,000 workers last month, according to the median estimate of 21 economists surveyed by Bloomberg News. The employment report will be published today.
Still, Mr Stevens said on Feb 2 that as information about the impact of the bank’s previous interest-rate increases ‘is still limited, the board judged it appropriate to hold a steady setting of monetary policy for the time being’.
Investors are betting there is a 24 per cent chance of a quarter percentage point increase in the overnight cash rate target at the central bank’s next meeting on March 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 8.33am.
Last year’s interest rate increases added about A$150 to monthly repayments on an average A$300,000 home loan.
An index of consumer confidence dropped 2.6 per cent in February, Westpac said yesterday, citing a survey.
The value of loans to people building their own homes fell 4.7 per cent in December, yesterday’s report said. The total value of loans dropped 2.8 per cent to A$21.9 billion.
The value of loans to investors who plan to rent or resell homes advanced 1.9 per cent.
Source : Business Times – 11 Feb 2010
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