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Home Loan approvals drop more than expected

Home Loan approvals drop more than expected
Mar 11, 2015 By Wise-owl

Home loans in Australia have dropped more than expected after a report from the Australian Bureau of Statistics was released today. The report underlined a 3.5 per cent decrease in home loan approvals in January. This was almost double the 2 per cent that analysts had forecasted. In addition, the report also showed that the value of owner occupier loans fell 1 per cent. Loans to investors fell only 0.1 per cent. Some analysts are not convinced that this data is cause for concern because the interest rate cut from the RBA may improve home loan conditions. “The flow of credit to the housing sector would only have strengthened subsequent to that rate cut” said CommSec economist Savanth Sebastian.

Other economic reports have substantiated Mr. Sebastian’s analysis. The Australian Bankers Association, which represents 23 major banks, has recently released a report claiming that although lower interest rates are in fact raising prices, property has actually become more affordable. The Key Truths on Housing in Australia report argues that borrowers tend to be those with more financial assets and also have the ability to manage a change in interest rates more easily. “House affordability is the best it has been for around five years and those households with the highest debt have the most assets as well as the highest capacity to service that debt,” the report found.

Other analysts have supported this report with other data. ABA Chief executive Steven Muchenberg has pointed out that although Australia’s household debt-to-income ratio has increased, it is still lower than pre-financial crisis levels. “The value of household assets is greater than the value of household debt – for every $1 of debt held by Australian households today, they have almost $6 of assets,” he said. Although home loans did decrease in January, many analysts believe that the interest rate cut will make this drop in home loans temporary.

 

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Wise-owl Author: Wise-owl Mar 11, 2015

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