HOME buyers, lured by a steady interest rate outlook and cooling house-price growth, have been returning to the market, with demand for home loans picking up.
At the same time, signs are emerging that the big banks are again letting home owners borrow more, with mortgage brokers reporting some lenders starting to relax their previously tight standards.
This pick-up in credit growth continues to benefit the big four banks, as smaller banks and other lenders are be priced out of funding markets, according to the latest snapshot of the nation's mortgage industry by JPMorgan and Fujitsu Australia.
Demand for home loans eased earlier this year, pressured by three consecutive monthly interest rate rises and ballooning prices along Australia's east coast.
In May, housing credit was running at a three-month annualised growth rate of 6 per cent; however, this had since increased to 8.2 per cent, the report found.
Yesterday the Australian Bureau of Statistics released figures showing housing finance commitments rose 1.7 per cent in July, seasonally adjusted.
The result easily beat the median market forecast of a 1 per cent rise.
Housing credit growth rates were expected to be sustained in the mid-to-high single digits over this financial year, JPMorgan's banking analyst, Scott Manning, said.
But with more people opting for variable, rather than fixed-rate loans, this had left households "delicately poised" at the present level of interest rates, he said.
This means more borrowers are acutely sensitive to any further increases in official cash rates or any moves by banks to increase rates independent of the Reserve Bank.
Although official rates are expected to remain on hold for now, borrowers could soon be tested by higher rates as their banks look to recoup funding costs.
Mr Manning said the recent round of earnings updates in which bank bosses warned that higher deposit rates and wholesale borrowings were starting to bite suggested they were positioning themselves for an out-of-cycle rate rise.
Commonwealth Bank and Westpac are regarded as under most pressure to raise rates, given the proportion of home loans on their lending books.
Smaller rivals such as ANZ and National Australia Bank have been able to increase rates across more of their business loans, helping protect profit margins.
The Reserve Bank this week opted to keep official cash rates on hold.
It suggested there was no need to increase rates in the near term, all the more so because of signs of international growth slowing while domestic inflation remained in check. The bank also noted that house prices were rising less rapidly.
