Nov. 10 (Bloomberg) -- Australian home-loan approvals fell in September for an eighth month as tighter lending standards and slowing economic growth prompted house-buyers to scrap spending plans.

The number of loans granted to build or buy homes and apartments declined 2.7 percent to 47,435 from August, when they slid a revised 2.1 percent, the statistics bureau said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg News was for a 2.8 percent drop.

A weakening housing market is among reasons the central bank cut its 2008 and 2009 growth forecasts today and signaled it's prepared to add to the most aggressive interest-rate cuts in 17 years. House prices fell in the third quarter by the most since 1978 and the building industry shrank in October for an eighth month, reports showed last week.

``We don't think falling interest rates will start to help these housing statistics until after Christmas,'' said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. ``Consumer confidence has fallen so much that people aren't thinking about expanding into the housing market.''

The Australian dollar fell to 68.66 U.S. cents at 12:54 p.m. in Sydney from 68.95 cents just before the report was released. The two-year government bond yield rose 2 basis points to 3.87 percent. A basis point is 0.01 percentage point.

Interest Rates

The Reserve Bank of Australia today lowered its 2008 expansion forecast to 1.5 percent from 2 percent and said it had been forced to make ``unusually large'' reductions in the overnight cash rate target in October and November because renewed global turmoil raised the risk growth will stall.

The government last week said the economy will expand 2 percent in the 12 months through June 2009, the slowest pace in eight years, as fallout from the global financial crisis prompts companies such as Qantas Airways Ltd. to fire workers and drive up unemployment.

Consumer confidence plunged last month by the most in more than two years, triggering the biggest drop in retail sales since April 2005.

To help reverse the slide in domestic demand, Governor Glenn Stevens cut the overnight cash rate target by three quarters of a percentage point last week, adding to a 1 percentage point reduction in October and a quarter-point easing in September.

`Appropriate Balance'

``The board will be seeking to strike the appropriate balance between avoiding an unduly sharp weakening in demand and the need for inflation to fall back'' within its target range of 2 percent to 3 percent ``over a reasonable period,'' today's quarterly monetary policy statement said.

Stevens will cut the rate by another half point to 4.75 percent next month, according to 12 of 19 economists surveyed by Bloomberg News on Nov. 7. Five expect a quarter-point reduction, one tipped a three-quarter point move and one forecasts a 1 percentage point adjustment.

Credit provided by banks and financial institutions to home buyers rose 9.2 percent in the 12 months through September, the smallest increase since October 1983, Reserve Bank figures published on Oct. 31 showed.

An index measuring the weighted average price for established homes in the nation's eight capital cities dropped 1.8 percent in the third quarter from the previous three months, the Bureau of Statistics said on Nov. 3.

Government Grant

Still, demand for home-loans may rebound in coming months as the central bank's interest-rate cuts are passed on to consumers by lenders.

The Reserve Bank's reductions since Sept. 2 have cut repayments on an average A$300,000 ($206,000) home loan by about A$400 a month.

The government is also trying to spur house building by tripling a grant to first-time buyers of new homes to A$21,000.

The total value of lending fell 1.6 percent to A$17.2 billion in September, today's report showed.

Lending to owner-occupiers declined 1.9 percent, while the value of lending to investors who plan to rent or resell homes, slipped 1.1 percent.

To contact the reporters for this story: Malcolm Scott in Sydney at Mscott23@bloomberg.netJacob Greber in Sydney at jgreber@bloomberg.net

Last Updated: November 9, 2008 21:06 EST