Mortgage lending growth slumps to new record low in May despite 50-basis-point cash rate cut: RBA

The May 2 cash rate cut of 50 basis points has failed to stimulate demand for mortgages, with just 0.3% growth in housing credit issued by lenders over the month, according to RBA seasonally adjusted figures.

Annualised growth has now fallen to 5.1% setting a new record low for RBA records dating back to August 1977.

The last time monthly mortgage growth slumped to 0.3% was in June last year. Monthly mortgage growth has not been above 1% since June 2007, when it rose 1.3% over the month.

The May 0.3% figure follows growth of just 0.4% in February, March and April and 0.5% in January.

Owner-occupier lending rose 0.3% over May, and loans for investment housing rose 0.4%.

Savanth Sebastian, economist at CommSec, says the housing sector has been a "key area of weakness over the past year"

"And the latest data on housing credit suggest that the sector is not turning around all that quickly.

"Granted there does seem to be a pickup in enquiry levels as more potential homebuyers are enticed by the attractive lower interest rates on offer, but it will take time for activity levels to pick up," he says.

Also commenting on the figures, John Peters senior economist at the Commonwealth Bank says consumer sentiment surveys reveal "deep household pessimism regarding Australia’s economic outlook, employment prospects, and consumer’s future financial situations".

"Combined with softening house prices and wilting local equities, consumers are currently unwilling to take on additional debt, and are in fact paying down debt at a great rate of knots," he says.

The total value of owner-occupier mortgages increased from $838.2 billion to $840.8 billion.

The total value of loans for investment purposes increased from $401.8 billion to $403.8 billion.

Business lending increased by 0.8% over May, after growing by 0.7% over April, to be up 3.3% for the year to May.