'Lift in borrowing boosts eggs on chance of rate rise', says economist

THE RBA is likely to lift interest rates for the fourth consecutive month in February, following a boost in borrowing.

Interest rates dice

THE Reserve Bank is likely to lift interest rates for the fourth consecutive month in February, following a late 2009 boost in personal and commercial borrowing, an economist says.

Total personal finance commitments rose 1.1 per cent in November, seasonally adjusted, to $7.053 billion, from $6.959 billion in October, the Australian Bureau of Statistics said.

Total commercial finance rose 4.0 per cent in November, seasonally adjusted, to $26.677 billion, up from $25.662 billion in October.

CommSec economist Savanth Sebastian said the central bank board would be encouraged by the figures ahead of its first meeting for 2010 on February 2.

"Annual lending is tracking higher," Mr Sebastian said.

"The pick up in borrowing (shown in) the latest result is due to an improvement in economic conditions and... it's clear that the improvements in job security are giving people more confidence.

"We still (expect) a rate hike (in) February."

Meanwhile, the data showed housing finance for owner occupation fell 2.9 per cent to $16.537 billion in November from $17.036 billion in October.

Mr Sebastian said the decline in the housing finance component of the series was a direct result of rising interest rates and reduced government stimulus to the housing sector.

The lending finance data were published a day after ABS figures showed a 5.6 per cent fall in in the number of home loans issued in November.

"It's ironic that, over the past year, what supported lending finance was housing, which has now contracted, largely due to the fact that we've had rate hikes and the expiry of the first home owners boost," Mr Sebastian said.

"It's important to highlight that it brought forward (housing) purchases by six months or so and we're seeing the natural lull now."

In December, the RBA raised its overnight cash rate for a third successive month to its current 3.75 per cent.

A February rate rise would mark the first time in 20 years the central bank has taken rates higher at four consecutive meetings.

The ABS data also showed lease finance fell 3 per cent in November to $370 million, compared with $382 million the month before.