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Housing finance accelerated into Q4, supporting the “still-warm” domestic demand narrative, but the RBA’s next hike is still more likely May than March. Summary:Q4 housing finance strengthened across owner-occupiers, investors and first-home buyersValue growth outpaced volumes, pointing to larger average loan sizesInvestor value growth cooled sharply from Q3’s surgeRBA hiked to 3.85% in February, citing sticky inflation and capacity pressuresMarket consensus leans May for the next move; March remains a lower-probability riskAustralia’s latest housing finance figures point to a clear pickup in credit demand into the end of 2025, but the signal for near-term Reserve Bank of Australia policy is likely to be modest.The Australian Bureau of Statistics said the number of new dwelling loan commitments rose 5.1% q/q in Q4 2025, while the value lifted 9.5%. Owner-occupier commitments increased 4.8% on the quarter and the value jumped 10.6%, while investor commitments rose 5.5% and the value grew 7.9%, a sharp step-down from the prior quarter’s very strong run. First-home-buyer activity also improved, with commitments up 6.8% and the value up 15.5%. The headline is that housing credit momentum stayed firm despite higher rates and still-elevated cost-of-living pressure, reinforcing the view that interest-sensitive parts of the economy remain resilient. For the RBA, however, housing finance is only one piece of the puzzle alongside inflation, wages, consumption and labour-market tightness.The central bank raised the cash rate to 3.85% on 3 February and has been explicit that inflation is expected to sit above the target band “for a while longer,” with recent strength in domestic activity adding to capacity pressures. Markets have been leaning to a follow-up hike in May, a line of questioning even surfaced in the post-meeting press conference, while the next decision is not until 17 March. A case can be made for a March move if inflation or activity surprises hotter again, but it remains a lower-probability outcome given the RBA’s preference to assess additional data and the already-tight setting of policy.In short: the housing numbers are consistent with an economy that is still running warm, but on their own are unlikely to shift the rate path decisively.
This article was written by Eamonn Sheridan at investinglive.com.
💡 DMK Insight
Housing finance is heating up, but the RBA’s next rate hike isn’t imminent—here’s why that matters. The recent uptick in housing finance in Q4 indicates robust domestic demand, particularly among owner-occupiers and first-home buyers. This could suggest that the property market is still resilient, despite the cooling investor activity. Larger average loan sizes signal that buyers are willing to stretch their budgets, which could lead to increased price pressures in the housing sector. However, with the RBA likely holding off on further rate hikes until May, traders should be cautious. The market’s reaction to this news could create volatility in related sectors, particularly in real estate stocks and mortgage-backed securities. But here’s the flip side: if investor activity continues to cool, it could dampen overall market sentiment, leading to a potential correction. Keep an eye on housing price indices and consumer sentiment reports, as these will be key indicators of whether the current demand can sustain itself. Watch for any shifts in RBA commentary, especially as we approach the May meeting, as that could set the tone for market expectations moving forward.
📮 Takeaway
Monitor housing price trends and RBA communications closely; a shift in sentiment could impact related assets significantly before May.
