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SYDNEY - Loan approvals have suffered their biggest fall in four years, adding to confidence that interest rates will stay put.
Economists say the decline in new mortgages is an early sign domestic demand is slowing amid gloomy consumer confidence.
National housing finance commitments for owner-occupiers fell by 5.9 per cent in February, the largest slide since January 2004 and the first dip since October, the Australian Bureau of Statistics revealed today.
The commodities-rich state of Western Australia suffered the biggest drop in home loan approvals, almost twice the national average at 11.6 per cent seasonally adjusted.
The data was compiled in the same month the Reserve Bank of Australia (RBA) raised interest rates to seven per cent, the highest level since November 1996.
Home loan approvals fell in most states even before official rates were hiked again in March, to 7.25 per cent.
Only Tasmania, with a 2.2 per cent rise, and the Northern Territory, where mortgage take-up grew by 0.7 per cent, bucked the negative national trend.
Across Australia, 63,817 home loans for owner-occupiers were approved in February, as the credit crunch pushed bank lending rates close to nine per cent.
The total value of housing finance commitments during the month fell by 7.1 per cent, seasonally adjusted, to $21.500 billion.
Investment housing loans, by value, fell 9.5 per cent.
ANZ economist Alex Joiner said higher interest rates, deteriorating housing affordability and gloomy economic forecasts had discouraged prospective home buyers from entering the housing market.
"Consumer sentiment in general seems to have turned and this has also taken some steam out of the residential market as the economic outlook for many becomes increasingly uncertain," Dr Joiner said.
The proportion of first home buyers fell by 0.8 percentage points in February to 17.2 per cent, the lowest level since August when the RBA raised rates.
A senior economist with money broker ICAP, Matthew Johnson, said the lacklustre housing finance data made another rate rise unlikely.
"The interest rate increases that the RBA has put through in February and March ... probably are going to slow the economy as the RBA wants," he said, adding that expectations of a March rate rise turned off potential borrowers.
Mr Johnson said the 6.6 per cent slip in the purchase of established dwellings during February suggested house prices were likely to fall further.
Lehman Brothers chief economist Stephen Roberts said the slowdown in housing credit and household borrowing were signs of a substantial slowing in domestic spending growth.
- AAP
