Demand for new home loans increased but well below expectations in February, the same month the Reserve Bank of Australia cut the official cash rate for the first time in 18 months, data from the Australian Bureau of Statistics shows.
According to the ABS, the number of home loans granted in February rose 1.2 per cent in seasonally adjusted terms to 53,614.
Economists surveyed by Bloomberg had expected the number of housing finance commitments to rise by 3 per cent in the month.
Total housing finance by value fell 1 per cent in the month, seasonally adjusted, to $30.399bn, while the value of investor lending slipped 3.4 per cent to $12.054bn.
Refinancing activity rose by 4.5 per cent in the month.
PICKERING: Housing's momentum is starting to stutter
The value of loan approvals to owner-occupiers, excluding refinancing, fell by 1.2 per cent in February and is now 0.8 per cent higher over the year.
The latest figures also show first home buyers’ share of new loans issued in the month rose to 13.7 per cent in February from 13.6 per cent in January.
The muted increase in demand for housing finance comes at a time when low interest rates are fuelling concerns of a burgeoning bubble in Sydney property prices as cheap credit encourages speculation in an already heated market.
The decision to cut the official cash rate to a record low 2.25 per cent in February has already been accompanied by signs of fresh momentum in the housing market, including higher auction clearance rates and prices. Sydney house prices rose 14 per cent in the year through February.
Earlier this week, when announcing its decision to hold the official cash rate at 2.25 per cent, the RBA said that dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities.
"The bank is working with other regulators to assess and contain risks that may arise from the housing market," RBA governor Glenn Stevens said. "In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates."
Economists expect, and financial markets have already fully priced in, a cut to the cash rate at the RBA's May meeting. The central bank is tipped to lower the cash rate to a fresh record low of 2 per cent.