Australian mortgage approvals increase

16 December 2008

The volume of home loans issued in Australia in October increased for the first time in nine months following the central bank’s decision to hack borrowing costs to encourage property buyers back into the market.

The number of loans issued to construct or purchase residential properties rose 1.3% to 48,299 from September, according to the Australian statistics bureau.

The biggest round of interest rate cuts since the economy was last in a recession in 1991 and an expanded government grant for first-home buyers is buoying demand for homes in Australia. Property prices depreciated in Q3 by the most since 1978 and the building industry shrank in November for a ninth consecutive month.

Stephen Walters, chief economist at JPMorgan Chase & Co in Sydney, said: “The number of first-home buyers should increase, in part owing to the expanded first-home owners' grant.” 

Central bank governor Glenn Stevens has cut interest rates by 3% since early September to a six-year low of 4.25%.

The reduction in borrowing costs will provide “significant” support for the economy in 2009 amid the global slowdown, Mr Stevens said on Tuesday. “There is scope to do more with macroeconomic policy settings if needed,” he added.

The total value of lending rose 1.9% to A$17.4bn (£7.6bn) in October, the report showed.