New data just released is showing signs housing finance levels are finally responding to higher interest rates, with the number of home loans for owner-occupiers falling by 5.9% in February (WA topped the list with a 12% fall). This was the biggest fall since the housing briefly popped back in 2004.
Most of the weakness was in lending to buy existing homes (lending to buy/build has been soft in recent months, but not to the same extent). If you exclude refinancing of existing mortgages, lending dropped 7%, which is the biggest fall since the housing market went nuts around the introduction of the GST in 2000.
Adding in the volatile investor lending category doesn’t change the story much. The total value home loans fell by 8% in February – if you exclude a fall in July this year, this was the biggest fall since the housing bubble briefly popped in 2004 before subsequently reinflating.
For the RBA, it would be happy to see housing finally responding to higher interest rates. These figures pre-date an official rate rise in March and a further increases by the banks, so further big falls in lending volumes are likely.
At this stage, the Reserve Bank would probably only read today’s figures as a sign that the long-awaited slowdown is under way, pointing to rates on hold for the foreseeable future. But if this keeps up, it’s possible official rates will start falling before the end of 2008, which will be welcome news for senior borrowers.
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Looks like a good sign. Hope the rates do drop soon.