Rates help to keep Oz loans down

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Australian home-loan approvals unexpectedly dropped in March to the lowest in more than 10 years as higher interest rates kept homebuyers on the sidelines and the central bank said the economy could have contracted.

The number of loans granted to owner-occupiers to build or buy houses and apartments dropped 1.5 per cent to 44,968 in March, from a revised 4.7 per cent decline the previous month, the Statistics Bureau said yesterday.

That compares with the median estimate for approvals to rise 2 per cent in a Bloomberg News survey of 20 economists, and was the lowest since February 2001.

"Higher interest rates in coming months will keep demand and price growth in check," said Matthew Circosta, an economist at Moody's Analytics in Sydney.

Property prices declined in the first quarter by the most since 2008 as floods in the nation's east coast disrupted the market and homes listed for sale climbed alongside rates.

The total value of loans fell 0.1 per cent to A$19.3 billion ($26 billion) in March, yesterday's report showed.

First-home buyers accounted for 16 per cent of dwellings that were financed in March, up from 14.9 per cent in February and lower than 16.4 per cent a year earlier, the report showed.

Earlier this month, the RBA said gross domestic product "is likely to have declined in the March quarter" as flood damage reduced coal production.

- BLOOMBERG