The surprise rise in home lending in March could well prove the peak for borrowing as interest rates rise in a housing market already facing many other challenges.
The Australian Bureau of Statistics will on Friday release housing finance figures for April.
Economists’ forecasts centre on a 0.3 per cent decline for the month following a 1.6 per cent rise to $33.3 billion worth of housing loans in March, just shy of the $33.9 billion record set in January.
However, there is a wide range of predictions for April, from a fall of six per cent to a rise of 1.8 per cent.
Westpac economists are expecting a three per cent decline for April, split between a 3.5 per cent fall for owner-occupier loans and a 2.5 per cent drop for investors.
House prices are now in decline in Australia’s major cities of Sydney and Melbourne, and other areas are expected to follow suit as rising interest rates take their toll.
The CoreLogic national home value index for May released earlier this week fell 0.1 per cent in May, its first decline since September 2020.
Growth in house prices has been slowing since mid-2021 as properties became unaffordable, consumer confidence soured amid cost of living pressures, and fixed-rate mortgages began to trend higher.
The cost of variable-rate mortgages is now also on the rise after the Reserve Bank of Australia hiked the cash rate from a record low in May.
Economists expect the RBA board will endorse a further increase of at least 25 basis points when it meets next Tuesday.
“You have to go all the way back to 2000 to find the last time the RBA raised rates by more than 25 basis points,” National Australia Bank economist Taylor Nugent said.
However, ANZ senior economist Felicity Emmett said there were signs in Wednesday’s national accounts for the March quarter that inflation pressures are broadening and wages are growing much more strongly than signalled in the recent wage price index.
“This suggests to us that policy needs to lean more strongly against the broadening of inflation pressures,” Ms Emmett said, predicting a 40 basis-point increase in the cash rate next week.
Economists expect steady increases in the cash rate in coming months to lift it to more than 1.5 per cent by early next year, compared with 0.35 per cent currently.
