The number of new housing finance commitments for owner-occupied housing rose 1.1 per cent in June, seasonally adjusted, to 65,151, the Australian Bureau of Statistics (ABS) said today.
Although it was the ninth consecutive monthly increase and the highest monthly rise since January 2008, the result was slightly below the median market forecast for a 1.8 per cent gain.
Nomura Australia chief economist Stephen Roberts said the number of new loans for owner-occupied housing remained "very firm", but was likely to peak in the next month or so, particularly as a roll back of the first home buyers grant boost near.
"Quite clearly the number is right back up at boom time levels going back a couple of years ago," he said.
"It is a very high risk that it pulls back again at some point in the future because obviously we are moving towards a phase where interest rates are more likely to go up.
"We are very close to the peak now for this cycle and I probably expect to see some stepping back as we go into the later part of the year."
The Reserve Bank of Australia (RBA) has kept official interest rates at a 49-year low of three per cent for the past four months.
But the central bank signalled on Friday that a recent run of stronger-than-expected economic data and improved sentiment, had "reduced the likelihood that a further reduction will be required".
Royal Bank of Scotland (RBS) chief economist Kieran Davies expects the number of first home buyers in the market to fade as the federal government's first home buyers grant boost is wound back.
The temporary boost was increased to $14,000 for those who bought an established home in October last year, while those who decided to buy a new home or build their own home were eligible to receive $21,000.
It will be scaled back to $10,500 and $14,000 respectively, from October 1.
"Activity should be weaker in the second half of the year as the first home buyers return to more normal levels," Mr Davies said.
"If anything, they could go below that because they were rushing to beat the original June deadline.
"There are signs of life outside the first home buyers, but the increased grant has had a big impact on the pickup since October."
Various state governments have also provided additional payments for first home buyers.
Resi Mortgage Corporation spokesperson Lisa Montgomery said borrowers need to beware of being caught up in a "fixed rate buying frenzy" amid speculation that interest rates are on the way up.
"Fixing has become more popular of late because many highly leveraged mortgage holders have mistakenly adopted the approach that they should 'protect' their home loan by locking in their rate at a known price," she said in a statement.
She said borrowers could add the difference between the fixed rate payment and standard variable payment to their current repayments.
"This way that extra difference pays off more principal from the loan, builds them a buffer and means they don't give up the flexibility to pay more, if and when they want to," she said.
According to the RBA, in June the average three year fixed home loan rate was 6.50 per cent, while the average standard variable was 5.40 per cent.
