Australian mortgage approvals surged by the most in four years in July in the latest sign that back-to-back interest rate cuts are reviving a previously dormant property market.
Home-loan approvals rose 4.2%, the biggest increase since June 2015 and almost triple economists’ forecasts, the statistics bureau said in Sydney Monday. The spike reflects a revival in house prices that last month jumped by the most in 2-1/2 years, as well as a surge in auction clearance rates.
A combination of Reserve Bank rate cuts in June and July to a record-low 1% together with government tax relief and incentives for first-home buyers is filtering through the property market. RBA chief Philip Lowe is easing policy to try to entice households — laboring under record debt with weak wage growth — to reopen their wallets.
Consumption accounts for three-fifths of Australia’s economy and wealth effects from rising property prices should also encourage spending.
The data showed that mortgages to first-time home buyers rose for a fourth straight month. The value of loans to investors jumped 4.7%, the most since 2016, and soared 5.3% for owner-occupiers in the biggest leap since 2015.
Economists and money markets reckon Lowe will cut twice more to 0.5%, which would be close to the lower bound for rates and open up the prospect of unconventional policy. Further reinforcing those expectations is that the RBA’s quarterly forecasts released last month were based on market pricing.
Australia’s economy grew at the slowest annual pace since the 2009 worldwide recession in the second quarter.
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