Owner-occupier mortgage lending disappoints in May with 0.2% rise: ABS

The May cash rate cut of 50 basis points failed to spark a revival in mortgage lending, according the latest ABS housing figures.

They show that the total value of owner-occupied housing commitments rose 0.2% in May 2012 to $13.6 billion on a seasonally adjusted basis, while the number of owner-occupier home loans fell by 1.2% (or 582 mortgages) to 46,120.

This figure is well below market expectations of a 8% month-on-month increase in the number of owner-occupied home loan approvals.

A separate Bloomberg survey of economists had forecast a 1% rise in the number of owner-occupier mortgages taken out over May.

The number of owner-occupier loans fell in New South Wales (down 451, 3.4%), Queensland (down 239, 2.6%) and the Northern Territory (down 5, 1.7%), while rises were recorded in Victoria (up 140, 1.1%), Tasmania (up 69, 8.7%), Western Australia (up 48, 0.7%) and the Australian Capital Territory (up 15, 1.8%). South Australia was flat.

The value of investment housing lending slumped 4.6% on a seasonally adjusted basis.

Demand for financing of new dwellings remainde week with the number of loans for new homes fallingl 0.3% on a seasonally-adjusted basis following a fall of 0.4% in April 2012.

One positive was an increase in the number of loans arranged for first-home buyers.

In original terms, the number of first-home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 17.8% in May 2012 from 16.8% in April 2012.

Between May 2012 and April 2012, the average loan size for first home buyers rose $5,500 to $285,700.

The average loan size for all owner occupied housing commitments rose $4,700 to $293,600 for the same period.

Andrew Hanlan, senior economist at Westpac says the 1.2% slip in the number of housing finance loans to owner-occupiers slipped in May "fell short of expectations".

 "The weakness evident in May reversed modest gains for March (0.7%) and April (0.5%), suggesting that the market was stabilising over this period," he says. 

"Loans to first-home buyes strengthened in the month, rising 3.9% to be up 11% on a year ago. However, the upgrader market remains sluggish, with loans to this segment slipping 2.5% to be unchanged on a year ago," says Hanlan.

"The investor market remains lacklustre and volatile from month to month.

"Looking ahead, RBA rate cuts in May and June will act to support the market over coming months.

"In the first instance, first-home buyers are likely to respond to improved housing affordability.

"However, we are not expecting a 'V' shaped recovery to emerge, with the sector facing a number of headwinds, including patchy labour market conditions and fragile confidence at a time of global risks," Hanlan says.