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Australian housing finance rises in May

Australian housing finance rises in May

SYDNEY: The number of Australian home-loan approvals rose a seasonally adjusted 1.0% in May from April, the Australian Bureau of Statistics said Tuesday. That was the first rise in approvals since January. Economists surveyed ahead of the announcement had expected a rise of 1.5% for May. The value of loans for investment housing fell 1.4% from April, the ABS said. Lending for housing and soaring house prices have been a key issue for governments, regulators and central bankers in Australia for some time. Efforts to stymie riskier lending for home mortgage lending were ramped up in March, and there are signs now the new regime is starting to have an effect.

Reserve Bank of Australia Governor Philip Lowe has warned record household debt poses a major risk to the outlook, especially if it grinds consumer spending lower and stalls the economy. The fears around housing are a key reason why the RBA retains a neutral stance on the outlook for interest rates, defying moves by its global counterparts to turn more hawkish. RBA board member Ian Harper told The Wall Street Journal last week that the central bank didn’t want to “scare the horses” by prematurely signaling a need for higher interest rates. “We’re on target, but to be blunt there is also plenty of evidence that you wouldn’t want to rush this,” Mr. Harper said. Similiarly, interest rate cuts seem unlikely as the RBA would risk fanning growth in household debt, increasing the potential for financial instability. The RBA’s official cash rate has been held at 1.50% since August last year.