Calls for February rate cut as home finance falls

A surprise fall in home loan approvals in November shows the national housing market is starting to moderate and a rate cut should be on the cards early in 2015, according to the Real Estate Institute of Australia.

Housing finance commitments across Australia were down 0.7 per cent, according to seasonally adjusted figures from the Australian Bureau of Statistics, while home loans in Western Australia were down 1 per cent.

In WA, 1,510 loans were for the construction of new homes, whole 5,794 were for homes in the established market.

Victoria was the only state to record an increase in home loan approvals in seasonally adjusted terms, with finance commitments rising 0.6 per cent.

The Northern Territory recorded the largest fall, with finance commitments falling 13.3 per cent, the ABS said.

The total value of home loan approvals for owner-occupiers in WA was $2.44 billion in November, down from $2.52 billion in October.

Nationally, the value of loans for owner-occupiers was $17.28 billion in November, down from $17.31 billion in October.

REIA president Neville Sanders said the data showed the market was tapering off the highs experienced throughout most of 2014.

“With moderating housing lending and GDP growth below trend and inflation well within the RBA’s target zone, the RBA board should be considering a cut in interest rates at its February meeting,” he said.

However, Mortgage Choice spokesperson Jessica Darnbrough said a seasonal slip in home loan demand around November was not unusual.

“In the lead up the Christmas, it is not uncommon to see many potential home buyers put their property plans on the backburner,” she said.

“Of course, while home loan demand dipped a little throughout the month of November, it is important to note that the number of home loans being approved is still in line with long-term averages."

Housing Industry Association senior economist Shane Garrett said the figures, despite falling, showed the housing construction sector was set to remain at a strong level throughout 2015.

He said lending was 4.6 per cent higher than at the same time last year, while building approvals reached an all-time high in November.

“Today’s lending figures add further to the evidence that Australia’s new home building industry will start 2015 on a strong footing,” Mr Garrett said.

“The number of loans remains high, although there is little sign of further growth.

“Fortunately, the flow of loans for new home construction is very solid; the number of new home construction loans in November was 7.6 per cent higher than a year ago.”

JP Morgan economist Tom Kennedy said the overall theme from the data was the housing market was slowing slightly from the peaks of last year.

"It's still going in the right direction but things are cooling,” he said.