Relief for RBA as Investor Mortgages Slip the Most in 3 YearsNarayanan Somasundaram
New mortgages to Australian landlords dropped the most in three years in February, signaling an easing in the speculator demand for housing that had concerned the Reserve Bank of Australia.
The value of new investor mortgages dropped 3.4 percent in February from a month earlier, the sharpest fall since January 2012, government statistics released Friday in Sydney showed. The measure increased 9.9 percent on year, the slowest pace since December 2012.
Slowing demand from investors may give the central bank greater flexibility to cut interest rates later in the year as tumbling commodity prices hurt the economy. The Reserve Bank reiterated last month its concerns that speculative demand for housing could “amplify” house price moves and increase the risk of significant falls in some regions.
“Softer growth in lending to investors will ease some of the RBA’s concerns of imbalances in the housing market,” Janu Chan, a senior economist at St. George Bank, a unit of Westpac Banking Corp., said in a research note. “Today’s data suggests that the RBA has some breathing room and should give greater comfort to lower official interest rates again.”
The central bank held its overnight cash target at a record-low 2.25 percent April 7 and said it could ease at future meetings. All 26 economists surveyed by Bloomberg expect the RBA to cut the rate by 25 basis points when its board meets May 5.
House prices have been strongest in Sydney where they have risen by almost 40 percent from a trough in May 2012.
Australia’s banking regulator in December urged lenders to limit investor mortgage growth to 10 percent a year and maintain sound lending standards. It said last month that it will determine in April whether it needs to take additional supervisory action against any bank.