•Westpac has revised its profile for the RBA cash
rate in 2014. Previously we expected that rates would be reduced by 25bps in both August and
November. The forecast is now for flat rates throughout 2014. As before we do not forecast
a rate hike until the third quarter of 2015 with a 25bp hike in both the September and
December quarters.
Growth in housing finance has been very strong, up 26.9% for the year to December and 22.3% for the year to January. Within that, loans to investors slowed from 40% (in December) to 28.6% in January. Owner occupiers slowed from 19.4% (December) to 18.6% (January). The “time to buy a dwelling” index from the Westpac Melbourne Institute Consumer Sentiment Survey is down by 16.8% from its September peak. There are tentative signs that housing lending might be slowing. As discussed, that slowdown, which has always been core to our forecasts, appears to be evolving. However, such a slowdown was a necessary but not sufficient condition for lower rates.
Growth in housing finance has been very strong, up 26.9% for the year to December and 22.3% for the year to January. Within that, loans to investors slowed from 40% (in December) to 28.6% in January. Owner occupiers slowed from 19.4% (December) to 18.6% (January). The “time to buy a dwelling” index from the Westpac Melbourne Institute Consumer Sentiment Survey is down by 16.8% from its September peak. There are tentative signs that housing lending might be slowing. As discussed, that slowdown, which has always been core to our forecasts, appears to be evolving. However, such a slowdown was a necessary but not sufficient condition for lower rates.
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