Home loan approvals hit ten-year low

New figures have revealed that home loan approvals tumbled to their lowest level for a decade earlier this year, with potential buyers growing increasingly uncertain over the prospect of interest rate hikes.

According to data from the Australian Bureau of Statistics (ABS), a seasonally-adjusted total of 44,968 applications for  were given the green light in March. The last time approvals were at such low levels was in February 2001.

"There's no incentive to dive into the housing market. There is no rush. The Reserve Bank knows lending has been weak," Icap economist Adam Carr told the Sydney Morning Herald. "People need to accept the reality that we don't want a credit boom during a mining boom."

The ABS report disappointed analysts, who had predicted an increase somewhere in the region of two per cent. In addition, the overall amount of housing finance by value was down by 0.1 per cent at $19.3 billion.

Credit for construction was also down by 1.1 per cent over the course of the month, while 1.8 per cent less money handed out for the purchase of existing properties. The average size of individual loans rose by $4,000 to $285,500, however.

Although the Reserve Bank of Australia looks set to consider further base rate increases as part of its ongoing fiscal normalisation process, Mr Carr insisted fears over the bank rate were not the primary cause of housing market jitters.

JPMorgan economist Ben Jarman added that the property sector was struggling to recover after recent flooding in Queensland and Victoria, which he claimed had caused "a fairly long-lasting drag" on home loan approvals.

Last week, Credit Suisse analyst James Ellis told AAP that banks' profitability could be threatened by the sheer weight of , as householders struggle to repay their arrears in the wake of the economic downturn.