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Date Published : Tuesday, June 10, 2008
The number of new home loans being taken out in Australia fell for the third consecutive month in April - although the decline has slowed from March levels, new figures reportedly show.
News service Bloomberg said according to the Australian Bureau of Statistics, the number of home loans given the green light in April fell three per cent, compared to a 5.7 per cent drop the month before.
It added that experts believe prospective househunters are being put off by high interest rates, which are pushing up the cost of borrowing. The site noted that following rises in February and March, the benchmark rate is now 7.25 per cent - the highest for 12 years.
Su-Lin Ong, a senior economist with RBC Capital Markets in Sydney told the news service: "Higher interest rates are biting … Households are paring back on their borrowing across the board."
Existing borrowers are also expected to feel the pinch, it said, as higher mortgage rates combine with increasing gas and food prices to hit them in the pocket.
However, there is some good news - Bloomberg reported that the drop in lending could ease inflationary pressures for the central bank - although it cautioned that the bank's governor Glenn Stevens said further interest rate rises could not be ruled out in the future if demand picks up again.
But some experts believe this is unlikely while economic conditions remain so tight. Brian Redican, a senior economist with the Macquarie Group, told news.com.au that despite the slowdown in the decline of home loan approvals, the chances for a widespread recovery in mortgage demand remain slim.
"There's certainly no sign of a turnaround in the housing market, probably for 2008,'' he said.
Total mortgage lending in Australia now stands at approximately $19.46 billion.
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