Rates bite at home loan numbers

HIGHER interest rates look to have begun taking their toll on home loan numbers after national housing finance figures fell 5.9 per cent.

Rates bite at home loan numbers

HIGHER interest rates look to have begun taking their toll on home loan numbers after national housing finance figures for February fell 5.9 per cent.

The effect of the Reserve Bank raising official cash rates, and banks passing on increased borrowing costs from the global credit crunch, appears to have tightened housing finance.

National housing finance commitments for owner-occupied housing fell by a seasonally-adjusted 5.9 per cent in February, where the market forecast was for a flat result.

That took dwelling commitments to 63,817, the Australian Bureau of Statistics said.

Total housing finance by value fell 7.1 per cent in February, seasonally adjusted, to $21,500 billion.

Investment housing, by value, descended 9.5 per cent to $6.553 billion.

Conversely, new dwelling purchase commitments rose by 0.3 per cent in February.

St George Bank senior economist Jo Heffernan said the lower numbers were "certainly weaker" than the market forecasts.

"That seemed to be mostly driven by the decline in purchases of established dwellings," Ms Heffernan said.

"Also investor housing finance by value declined sharply, down by 9.5 per cent.

"We also saw the proportion of loans on a fixed rates rising to 23.8 per cent in February."

The housing finance data was compiled after the Reserve Bank of Australia (RBA) raised official interest rates in February to 7.00 per cent.

In March, the RBA raised the cash rate again, to 7.25 per cent, its highest level since July 1996.

During January, the major banks lifted their variable lending rates by between 10 and 20 basis points even though the RBA did not meet.

Ms Heffernan said the poorer numbers would continue in March from the RBA's lifting of interest rates.

"It looks as if the higher interest rates that we have seen from the RBA are beginning to impact housing finance numbers, as well as some economic data recently," she said.