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Rate rises impact new home loans
Released 16 February 2011

The number of owner occupier loans for new housing fell in December 2010, driven by a marked fall in lending for the purchase of new dwellings, according to the Housing Industry Association.   

HIA Senior Economist, Andrew Harvey, said that in December 2010 the number of loans for the purchase of new dwellings fell by 10.1% while the number of loans for the construction of dwellings increased by 1.0%.

“Given the November 2010 interest rate hikes by the Reserve Bank and Australia’s trading banks it’s no real surprise that there is not much to love about the Valentine’s Day housing finance figures,” Harvey said.

“Whilst the December fall in new home loans follows a welcome run of three months of increases, the impact of the Melbourne Cup day hikes is now emerging and combined with ongoing credit constraints will flow through to softer housing starts during the first half of 2011.”

In seasonally adjusted terms, in December 2010 the total number of owner occupier loans increased by 4.8% in New South Wales, 3.3% in Victoria, 2.0% in Queensland, 0.3% in South Australia, 0.9% in Western Australia, 4.8% in Tasmania, 1.0% in the Northern Territory, and 2.1% in the Australian Capital Territory.

“Let’s hope that the growing expectations about a forthcoming period of interest rate stability turn out to be warranted, as this could provide some optimism to would-be home buyers and may allow a sustained increase in housing starts to emerge,” added Harvey.