Drop in home loan approvals sends message to RBA

by 13 Feb 2014

An unexpected drop in the number of home loan approvals highlights the need for the RBA to remain on the interest rates sideline, according to 1300HomeLoan.

Despite most economists forecasting a rise in home loan approvals of almost 1%, the ABS found the number of home loans approved in December 2013 fell 1.9% compared to the previous month.

1300HomeLoan managing director John Kolenda said the figures show the RBA should tread cautiously when considering official interest rate movements this year.

“The RBA has kept its cash rate at the record low of 2.5 per cent since August last year and this has helped the housing market and provided much needed stability for consumers,” said Kolenda.

Kolenda said leaving rates on hold provides certainty even though retail and residential property sales have shown improvement.

“The RBA should leave rates where they are for at least the next six months until we see an improvement in other sectors such as unemployment, which remains an area of concern,” he said.

“Any premature increase in rates is likely to change consumer sentiment back to being conservative.

“Creating a more positive consumer sentiment has taken numerous rate decreases over the past few years and raising it will have a material impact on consumer confidence.”