The sales of a new home usually trigger a sequence of consumption. In addition to the high expenditure of the new home, buyers are likely to spend more money on furnishing and customizing their home. Consequently, g rowth in the housing market spurs more consumption, generating demand for goods, services and the employees to provide them. Thus a n increase in loans may forecasts growth in the economy.
National Australia Bank and rivals Australia & New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corp. (WBC) reported slimmer profit margins for the six months ended March 31 as they paid more to attract deposits and demand for credit dwindled. The nation’s four biggest lenders this month withheld some of the central bank’s 50 basis-point interest rate cut to protect margins as funding costs rise. National Australia Bank has pledged to offer the lowest standard-variable mortgage rate among the top four banks as it seeks a larger slice of the nation’s A$1.1 trillion ($1.1 trillion) home loan market.
The lender’s net interest margin, a gauge of the profitability of its mortgages, narrowed 6 basis points to 2.17 percent as of March 31, it said May 10. The bank reported a 15 percent decline in first-half profit after booking charges to shrink its unprofitable U.K. division.
Sales of new homes in Australia fell in March to a record low, according to the Canberra-based Housing Industry Association. House prices declined in the three months through March in the longest losing streak in at least a decade, Australian Bureau of Statistics data show.
Housing credit growth held at 5.3 percent in March, down from 8.3 percent two years earlier and the least since central bank data began in 1977.
National Australia Bank’s loan book is showing “quite good performance,” Clyne said. While house prices may “fall slightly,” they’re unlikely to collapse while unemployment remains low, he said.
Australia’s jobless rate unexpectedly dropped to a one-year low of 4.9 percent in April as payrolls rose for a second straight month, the statistics bureau said May 10.
“The economy’s been able to absorb the house price declines to this point,” Clyne said. Still, the “decline does have an impact on consumer confidence.”
Australia’s central bank may reduce its benchmark borrowing rate by another 50 basis points, or 0.5 percentage point, in 2012, according to Clyne.
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