Annual growth in bank lending to home buyers has surged to the fastest pace in two years, reinforcing speculation the Reserve Bank of Australia will signal next week that its easing cycle has finished.
Figures released by the Reserve Bank on Friday showed lending for housing rose 0.6 per cent in December, the largest gain since December 2010. Annual growth quickened to 5.4 per cent.
Borrowing by housing investors was also particularly strong in December, gaining 0.8 per cent and 7.1 per cent from a year earlier.
The figures come as the Reserve Bank board prepares to hold its first meeting for 2014 on Tuesday. Economists anticipate the board will leave the cash rate at a record-low 2.5 per cent, however there is talk it may drop its so-called “easing bias”, effectively signalling that there will be no further rate cuts.
Financial markets expect the Reserve Bank to keep the cash rate on hold in coming months, before starting to increase borrowing costs later this year or earlier next year.
Total credit rose 0.5 per cent from November, taking the 2014 gain to 3.9 per cent, the Reserve Bank figures showed. Business lending rose 0.4 per cent in the month for an annual rise of 1.7 per cent.