New housing finance fell in November, ABS says

A DROP in new home loans as first home buyers dwindle will not stop the RBA from lifting interest rates next month, economists say.  

BORROWERS will not be spared a fourth consecutive interest rate rise next month, despite a bigger-than-expected fall in housing finance commitments, economists say.

Housing finance commitments for owner-occupied housing fell 5.6 per cent in November, seasonally adjusted, to 59,516, the Australian Bureau of Statistics said.

The median market forecast was for housing finance commitments to have fallen 0.5 per cent in November.

ICAP economist Adam Carr said the fall was the result of first home buyers falling away from the market, and that a February rate rise by the Reserve Bank still was likely.

"It was weaker than I was expecting, although it was not a complete surprise to see lending growth slow,'' Mr Carr said.

"It would be (that) first home buyers are being priced out of the market with the grants winding up.

"I don't think the RBA is going to be worried about this number, not at all. I certainly don't think it will rule out a rate hike in February.''

Mr Carr said the first home buyer drop-off from the housing market was the first stage of economic recovery and was expected in an environment of rising interest rates.

"The first stage of the recovery was based on extremely low interest rates and, effectively, subsidies for first home buyers, so obviously they were going to come into the market with gusto,'' he said.

"Those grants are winding down and rates have risen, so we've gone from an emergency rates setting to a higher setting, and now it's much less affordable (to get a mortgage) for first home buyers and that's why they're dropping out.''

In November, the RBA took the cash rate to 3.5 per cent from 3.25 per cent. It was the Bank's second rate rise in as many months.

The cash interest rate currently sits at 3.75 per cent following a third 25 basis point rise in December.

On December 31, the Federal Government has rolled back its first home buyers grant from $10,500 to $7000 for existing homes and from $14,000 to $10,000 for new homes.