RBA paints mixed picture of local and global conditions, but with house prices and mortgage lending trending up

House prices rising unevenly, mortgage lending trending up among investors and upgraders but not among first-home buyers, building approvals volatile but trending down and the world economy slowing down with the euro zone facing unemployment strife.

The latest edition of the comprehensive RBA chart pack provides an indication of the range of different factors the monetary policy committee had to take into account when deciding to cut the cash rate to a historical low of 2.75%.

Of most interest to investors and homeowners will be the improving housing market picture with house prices trending up fairly strongly though unevenly in Sydney, Melbourne, Perth and Brisbane:

However, building approval figures, an indication of future demand for new homes and apartments, remain volatile with an overall downward trend in evidence, particurlarly in the key detached new housing market.

RBA governor Glenn Stevens reported only a “modest firming in dwelling investment” in his post-decision monetary policy statement on Tuesday:

However, the mortgage market appears to be picking up slowly, but not among the key first-home buyer market where changes to state incentives favouring new homes over existing homes appears to be having a dampening effect:

The pick-up in mortgage lending is being driven by low variable mortgage rates and the record low cash rate, though the graph below shows rates are still off their 2009 variable rate lows, a reflection of banks not passing on prior rate cuts in full:

With lenders continuing to cut their fixed-rate offerings to try and lock in more conservatively-minded borrowers, three-year fixed-rates are at historical lows as this graph shows:

The chart pack also shows that global conditions are declining with the world economy set to expand by just 3%, though conditions are better for Australia’s trading partners:

This graph shows the trend of rising unemployment in the eurozone, but employment conditions improving in the US and to a moderate extent, Japan.

Lastly, much of the commentary surrounding the decision to cut the cash rate has been about muting the effects of the high Australian dollar on exchange-rate dependent industries like retail, trade and manufacturing.

This graph shows the extent the currency has appreciated against the US dollar, Euro and Japanese Yen in recent years, though now off its peaks against the US dollar and euro: