Low rates urge Aussies to buy their homes

12 Jul 2013, 4:40 pm   -   Source: AAP

A rise in home loan approvals is a sign that record-low interest rates are working to stimulate the housing sector.

The housing market is on the road to recovery as record-low interest rates encourage people to buy their own homes.

Mortgage numbers rose by 1.8 per cent in May, the month the Reserve Bank of Australia (RBA) trimmed the cash rate to 2.75 per cent.

ANZ head of property research Paul Braddick said the figures showed lower interest rates were gaining traction in the housing market, with homebuyer sentiment remaining strong.

"It stands in pretty stark contrast to the weakness we've seen in a lot of the broader economic data over the last month," he said.

"Markedly better housing affordability, improved buyer sentiment and substantial pent-up homebuyer demand are supporting growth in home sales, prices and lending."

JP Morgan economist Ben Jarman said loan values to owner-occupiers, as opposed to investors, had grown almost eight per cent over the last six months, its strongest pace since the expanded first homebuyer boom of 2009.

But although the housing sector appears to be recovering, it is happening slower than expected, said Westpac senior economist Matthew Hassan.

"Given the degree of stimulus that we've seen, particularly from interest rate cuts, you might expect a stronger recovery at this stage, so in a sense, it's still a little bit disappointing," Mr Hassan said.

"The question is whether that recovery is strong enough, given the drag starting to come through from the mining sector.

"Given where interest rates are and the requirements for non-mining sectors to pick up the slack from the mining downturn, there's quite a high hurdle here for maintaining growth."

CommSec economist Savanth Sebastian said housing finance was having its best start to a calendar year since 2009.

He said the increase in construction loans for new homes - driven by state government incentives for new homebuyers - was the "jewel in the crown".

"Low interest rates, strong population growth, healthy employment, and pent-up housing demand are starting to see the home-building sector shake off the shackles and begin a much needed resurgence," Mr Sebastian said.

"Granted it is early days, but the sector is certainly on a recovery path.

"The lift in housing construction leads to greater activity across depressed housing and retail sectors and increases housing supply in line with higher demand."

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