Home Loans Drop, Interest Rate Cuts Encouraged

The Australian Bureau of Statistics reports that home loan approvals have dipped for the second consecutive month this year. The development has prompted economists to forecast that an interest rate cut next month will most likely happen.

Industry analysts said that the housing finance commitments were expected to drop to 3.4 percent by February. The data from the bureau, however, showed a drop of 2.5 percent. The actual results were welcomed as the figure is considerably better than expected.

Su-Ling Ong said the small improvements, which picked up during the second half of last year, may be getting its boost from tax breaks that were particularly given to first-time homeowners. Su-Ling Ong also expressed optimism, saying things are looking a bit better. Su-Ling Ong is a senior economist from RBC Capital Markets.

With the current situation, however, there’s a chance the trend may soon reach its mark and will be unwinding.

In the last eight months, consumer confidence has fallen to about 1.6 percent compared to the previous year, much to the dismay of industry observers. The central bank is expected to issue a cut in the interest rate for May to boost the housing sector.

The Reserve Bank of Australia (RBA) is also open to the possibility that this may happen to support some sectors. Another interest rate cut in September should also be expected, says the analyst.

The Australian dollar, meanwhile, remains steady in its status. It was trading at US$1.0255 and grew to US$1.0260. Industry experts remain observant of the changes in the economy.

Tagged ABS, economics, interest rates