Housing finance remains weak in January

A bigger-than-expected fall in home loan approvals has added to fears the sector will slow the economy sharply in 2019.

Mortgage broker Marissa Schulze.

Australian housing finance remained soft in January, adding to fears the sector will slow the economy sharply in 2019 and spur interest rate cuts before the end of the year.

The number of home loan approvals, including refinancing, fell by a seasonally adjusted 2.6 per in January from December, the Bureau of Statistics said.

Economists had expected no change for the month.

The value of loans for investment housing, excluding refinancing, fell by 4.1 per cent from December, the ABS said.

Finance approvals to build new houses fell by 0.2 per cent in January. Approvals to buy newly built dwellings fell by 9.5 per cent, while lending for the purchase of established homes fell by 0.6 per cent in the month.

“Weaker lending for dwellings again drove much of the overall fall in lending to households, with further falls in lending for investment dwellings and for owner-occupier dwellings in January,” ABS chief economist Bruce Hockman said.

“Reflecting the impact of both supply and demand side factors, new lending for dwellings is down over 20 per cent from January 2018, the largest through the year decline since late 2008.”

The housing market has been soft since mid-2017 after clamps on mortgage lending were tightened, especially to investors, while a high level government inquiry into the misdeeds of the finance sector made banks cautious around issuing new loans.

House prices have fallen sharply in the past year, led by Sydney and Melbourne. The slide has many concerned it will severely dent consumer confidence and slow the economy.

Economic growth data for the second half of 2018 showed the brakes are being applied to the economy, with the Reserve Bank of Australia moving in February to a neutral policy bias.

Financial markets have priced in interest rate cuts before the end of the year, with many economists forecasting those cuts could happen within months.

Dow Jones Newswires, AAP