Western Australia experienced the highest growth in owner occupier loans in February as national demand fell for the fifth straight month, new figures show.
Western Australia experienced the highest growth in owner occupier loans in February as national demand fell for the fifth straight month, new figures show.
Just 50,287 mortgages natiojnally were granted to owner-occupiers in February, down by a seasonally-adjusted 1.8 per cent compared to January, Australian Bureau of Statistics data shows.
The decline came before the two latest interest rate rises.
Economists' forecasts had expected a 1.0 per cent fall in February home loan commitments.
In WA, demand for home loans rose 3.7 per cent in February. The data comes as the state government yesterday announced tougher eligibility requirements to its Keystart home loans program, which the state opposition says will make it harder for young families to enter the property market.
The Barnett government will drop the maximum income for a couple from $120,000 to $90,000, while the deposit on a dwelling has increased from 4 per cent to 6 per cent, of which half has to be genuine savings.
Home loan demand in Victoria also increased with a rise of 1.3 per cent.
Demand in South Australia slumped by 8 per cent, New South Wales fell by 5.2 per cent, Tasmania dropped by 5.3 per cent and Queensland fell by 3.5 per cent.
Last year's three interest rate rises and an end to the federal government's more generous first homebuyer grant at the end of 2009 were blamed for the steady drop-off in national mortgage demand.
The Reserve Bank of Australia has since raised the cash rate twice this year, the most recent being at last week's monthly board meeting that took the cash rate to 4.25 per cent and 125 basis points above its 2009 trough.
First homebuyers made up 18.1 per cent of loans granted in February compared to 20.5 per cent in January, and down from a record high of 28.5 per cent in May 2009.
Economists say the Reserve Bank of Australia will raise the cash rate one more time before giving borrowers a long reprieve.
ICAP economist Adam Carr said the lending data would concern the RBA, causing the Bank to reassess the pace of future interest rate rises.
"It's pointing to a sharp, broad-based decline in lending activity," Mr Carr said.
"That would suggest to me that we're getting to the point where the pace of rate hikes will slow, markedly.
"The RBA will only hike once more and then ease off."
The central bank has lifted the cash rate five times in the past seven months.
The current interest rate is 4.25 per cent.
Meanwhile, RBA assistant governor Guy Debelle told a Senate committee in Sydney the central bank isn't trying to suppress demand by raising interest rates.
"We're trying to ensure growth is at a sustainable pace," he was reported by Bloomberg to have told the Senate Inquiry into Access of Small Business Finance.
Mr Carr said today's ABS data showed activity already was being dampened.
"It's already happening," he said.
"So I would imagine that there's not a lot left in the tightening cycle in the near term at least."
He could not predict whether the bank would next raise the rate in May or June, however.
The ABS data also showed total housing finance by value fell by 3.4 per cent in February, seasonally adjusted, to $20.486 billion.
CommSec economist Craig James said that, while the housing finance figures had been affected by the withdrawal of government stimulus, it should give the central bank reason to hold the cash rate steady.
"It's time for the RBA to move to the side lines and have a greater assessment of what's going on," he said.
"They have been more aggressive than what they suggested in their statements and now it's the most aggressive rate hike cycle since 1994."
The ABS data showed the number of home loans had fallen for five of the past seven months.
This indicated that the reduction of government stimulus measures, like the first home buyers grant, was having an effect on consumers, Mr James said.
"There's certainly been a significant retreat from the housing market," he said.
"It's been led by first home buyers."
The federal government has, since September 30, scaled back its first homebuyers grant from $21,000 for new homes to $7000.
Mr James said he expected the housing figures to continue to underperform over the coming months.
"It probably isn't going to stop there, with interest rates going up again in the latest month.
"More people will be on the sidelines doing their sums to see what they can afford to get into the market.
"Buyers are going to be a little bit more cautious."
Westpac said the pull back in housing finance commitments was the direct result of the withdrawal of government stimulus measures, and with rising interest rates pecking at demand on the margins.
"(First home buyers) are likely to fall further as some of the surge in response to the scheme would have been buyers bringing forward their purchase decisions to take advantage of the bonus payments," Westpac said in a research note.
"The winddown in first home buyer demand associated with the end of additional government incentives remains the dominant force, with higher interest rates also dampening demand at the margin.
Westpac said it was impossible to gauge the exact effect of the RBA's rate rises, when taking into account also the winding back of the first home buyer bonus.
