House buyers shrug off interest rate rise

HOME buyers shrugged off the Melbourne Cup day interest rate rise to boost housing finance by a strong 2.9 per cent in November.

The seasonally adjusted increase in loans taken out by owner-occupiers to buy new or established homes was the largest since September 2009, defying market predictions of a fall in the measure.

Economists had expected the total number of new and refinanced home loans to owner-occupiers to slide by 1 per cent, winding back October’s 2.2 per cent rise, in the wake of the Reserve Bank’s seventh consecutive hike in the official cash rate on November 2.

“The latest figures on home lending are certainly encouraging,” CommSec economist Savanth Sebastian said.

“However, a couple more months of improving figures would be needed to claim a full-blown turnaround in the fortunes of the housing sector, especially given the last interest rate hike is yet to have a profound impact.”

Owner-occupiers provided the greatest support for lending, with first-home buyers marginally increasing their share of the market to 15.6 per cent. But investors remained cautious, with the value of their borrowings dropping by 2.3 per cent.

Owner-occupiers hedged their risk by shifting to fixed interest loans, which financed 8.1 per cent of all homes in November, up from 6.9 per cent the previous month. They also moved much of their business to building societies, wholesale lenders and other non-bank institutions, which collectively recorded a 22.7 per cent jump in the value of their loans.

Date: 13 January 2011 | For the full report, please visit http://www.theaustralian.com.au