Mortgage approvals on rise in Australia

Sydney: Australian home-loan approvals rose in June by the most this year as buyers responded to the central bank’s 1.25 percentage points of interest-rate cuts since the start of November.

The number of loans granted to build or buy houses and apartments gained 1.3 percent from May, when they fell a revised 0.9 per cent, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 17 economists was for a 2 per cent increase in approvals.

“Whilst home loans fell slightly short of expectations, there are signs of a pickup in housing activity,” said Celeste Tay, a Singapore-based economist at 4cast Ltd. The 75 basis points of cuts in the middle of the year that “took mortgage rates below average in May, for the first time this easing cycle, likely helped,” she said.

Today’s data, a stronger-than-forecast increase in retail sales and an unexpected gain in house prices add to the case for Reserve Bank of Australia Governor Glenn Stevens to extend a rate pause next month. The RBA cut the benchmark four times from November to June as weakness in Europe and China threatened the global outlook, before leaving borrowing costs unchanged at 3.5 per cent at its past two meetings.

Today’s data showed the total value of loans rose 2.4 per cent to A$20.7 billion ($21.8 billion) in June.

Loans to Investors

The value of lending to owner-occupiers gained 1.2 per cent, the report showed. The value of loans to investors who plan to rent or resell homes advanced 4.9 per cent.

First-home buyers accounted for 18.3 percent of dwellings that were financed in June, up from 17.8 per cent in May and higher than 16.4 per cent a year earlier, the report showed today.

Recent reports have shown stronger consumer spending in Australia, fuelled by A$2 billion in government carbon rebates and benefit checks paid out since May, as well as the rate cuts. Retail sales in June matched the biggest advance since April 2011.

Australian house prices unexpectedly rose in the three months through June, ending five straight quarters of declines, a government report showed August 1. House and apartment prices in major cities climbed 0.6 percent in July from the prior month, when they rose 1 per cent, according to the RP Data-Rismark home value index released on the same day.

Rate-cut bets

Traders are pricing in a 45 per cent chance the central bank will lower borrowing costs by a quarter percentage point to 3.25 per cent next month, swaps data compiled by Bloomberg show. The local dollar traded at $1.0552 at 12:07 p.m. in Sydney, from $1.0554 yesterday in New York, when it touched a more-than-four- month high of $1.0604.

Powering growth is Australia’s biggest resource boom since a gold rush in the 1850s. The latest bonanza - for iron ore, coal and natural gas - is bringing investment projects the government estimates to be worth A$500 billion.