Australians borrow less to buy homes in May

The Bank left rates unchanged for a seventh consecutive month this week.

Housing finance by volume fell 2.6 per cent in May, exceeding forecasts of a 1.0 per cent decline. The value of loans, excluding those to investors, fell for the first time in four months, dropping 1.2 per cent. The figures are seasonally adjusted.

The central bank has been worried about unprecedented levels of household debt and economists say any clear rebound in demand for housing and home prices could see the central bank increase interest rates in 2004 as it did last November and December. Finance commitments by investors to buy or build properties for rent or resale – a particular area of concern for the Reserve Bank – fell 2.0 per cent in May, the Australian Bureau of Statistics said.

Rate-sensitive September 90-day bank bill futures implied a yield 23 basis points above the current 5.25 per cent cash rate after the housing data. The contract had been fully pricing a rate increase earlier this week.

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