Two interest rate rises in the second half of last year failed to deter potential home buyers from seeking finance but have discouraged investors from joining the fray, new figures show.
Figures released on Wednesday by the Australian Bureau of Statistics (ABS) showed a solid rebound in housing finance approvals in November, despite interest rates rises earlier that month and August.
Housing finance commitments for owner-occupied housing rose a seasonally adjusted four per cent in November, exceeding market expectations of a one per cent improvement.
By value, housing finance rose half a per cent in the month to $22.295 billion, the ABS said.
But the value of loans to investors fell by 2.8 per cent to $6.739 billion.
"Housing finance approval growth rebounded strongly in November, even with the ... rate hike early in the month fresh in the minds of potential home buyers," ANZ economist Alex Joiner said.
"However, the figures suggest that the recent interest rate hikes have been enough to deter the investor side of the market," Dr Joiner said.
He said the figures also indicated an increasing disparity between the approvals for new and established housing, and showed first home buyers were continuing to struggle to gain a foothold in the housing market.
"It would seem (hikes in) interest rates have hit hardest those that can least afford (them), with the purchase new homes, usually purchased by those entering the market for the first time, falling 7.3 per cent."
And with a raft of recent data, including strong retail sales growth in November and unofficial forecasts pointing to further inflationary pressures, adding to the case for a hike in official cash rates in February, it seems housing sector volatility is set to continue.
" ... we do expect conditions to worsen with affordability continuing to deteriorate throughout 2008 as house prices and interest rates march ever higher," Dr Joiner said.
"Further interest rate rises in the first half of 2008 will see a continuation of what has been a softening trend in approvals."
The current interest rate environment has already seen borrowers shift in droves to fixed interest home loan products, an indication of the level of uncertainty among Australian households.
The proportion of people taking out fixed-term home loans hit an eight-year high of 24 per cent in November, up from 21 per cent in October.
"Home loan borrowers clearly have had enough of rising interest rates, with one in four opting in November for fixed-term rather than variable-rate loans," CommSec chief equities economist Craig James said.
"And the most recent rate hike prompted more borrowers to either shift loans to another lender or seek better terms," he said.
"The upsurge in refinancing activity is a very positive development, indicating that people are keen to get their financial houses in order so that their lifestyles are not adversely affected by rising interest rates."
