Figures have recently been released by the Australian Bureau of Statistics showing that in September home loans in Australia increased for the third month in a row. The level of the increase was higher than the level that had been predicted by many industry experts, and indicated that confidence levels amongst consumers has been increasing.

Although there was uncertainty in September with regards to whether interest rates would increase this does not seem to have put off consumers, who are said to have taken the threat of possible increases in their stride. Whilst the cash rate went up earlier this month from 4.5 percent to 4.75 percent, in September, which is the month on which the ABS figures were based, any talk of a cash rate increase was mere speculation.

September saw home loans increase by 1.3 percent according to the figures from the ABS, and this was higher than the 1 percent increase that some industry officials had predicted. The September increase followed a 1.1 percent increase in August. ICAP analyst, Adam Carr, said that it was clear that lending levels were increasing, and that the figures came as good news.

Rising interest rates and a shortage of affordable housing is set to put increased pressure on the property market, and this will invariably have a knock on effect on the home loans sector. However, over the past couple of months the increased stability of the economy in Australia coupled with increased consumer confidence has helped to boost home loan figures.

Carr said that there was fundamentally nothing wrong with the Australian lending markets, adding that the established lending market was doing very well. However, he added that people could start to lose confidence as a result of concerns about the way in which the cash rate would continue to go.

Following the cash rate rise from the Reserve Bank of Australia the Commonwealth Bank quickly took steps to increase the rates on its variable rate mortgages. It has been reported that other major Australian banks are getting geared up to follow suit, and this could also impact upon consumer confidence over the remainder of this year.

Referring to the home loan figures for September the ABS reported that the value of loans for homes that were owner occupied increased by 0.6 percent to a value of $13.75 billion. There was also an increase in the value of loans for investment properties, which increased to $6.63 billion, reflecting an increase of 1.7 percent. The ABS also outlined figures relating to commitments to buy homes, with figures showing that there was a fall in the number of commitments to buy new homes, which fell by 3.2 percent following seasonal adjustments. However, there was an increase in the number of commitments to buy established homes, which increased by 1.6 percent.

Mr Carr said: "The established lending market is doing very well. The numbers show there is nothing structurally wrong with the lending markets but people have been spooked by the pace at which rates are going.” He added: “The lending numbers and approvals numbers both point to on-going price gains."

Written by Michael Sanz