Rate cuts may finally be working

Deep cuts in interest rates may at last be stimulating household borrowing, with annual growth in housing credit edging up from record lows in April.

Over the year to April, the value of outstanding home loans grew by $48.8 billion, to $1.29 trillion, Reserve Bank figures showed on Friday.

In percentage terms, housing credit grew by 4.5 per cent over the year, up slightly from its record-low pace of 4.4 per cent.

While growth is still sluggish by historical standards, it is the first time the pace of annual expansion has increased since February 2010, and could signal a turning point for the mortgage market.

The increase comes amid signs of stronger auction clearance rates and house price rises and follows the Reserve Bank's cutting the cash rate to 2.75 per cent in May, lower than what the government called "emergency levels" during the global financial crisis.

However, economists stressed that households still appeared debt-shy, and there were no signs of a rapid lift in borrowing.

ANZ's head of property research, Paul Braddick, said the annual pace of credit growth had probably bottomed.

But he said it was unlikely to increase sharply.

"We think the second half of this year should see it lift slightly higher," Mr Braddick said.

He also stressed that mortgage growth was likely to remain very weak by historical standards.

ANZ is tipping a modest rise in the pace of annual housing credit to 5 per cent by 2014, well shy of the growth rates of up to 14 per cent before the global financial crisis.

JPMorgan economist Tom Kennedy said the 4.5 per cent a year growth in housing credit was "still the fourth weakest reading in the history of the RBA's private sector credit data".

Macquarie analyst Mike Wiblin said ANZ and NAB had expanded their mortgage books by 6.7 per cent and 6.9 per cent, respectively.