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The falloff of first home buyer activity is an indicator that the RBA needs to lower interest rates, according to Paul Smith corporate spokesperson at Loan Market.
"There had been a revival in the first home buyer sector late last year and early this year on the back of the RBA twice cutting the cash rate [late last year]. But the combination of official rates staying on hold and the banks raising rates independently of the RBA has caused confusion in the marketplace as some buyers are unsure exactly where home loan interest rates are headed," Smith said following the release of a Loan Market report showing a 20% decline in the mortgage brokerage's FHB activity in March.
Smith said a lowering of the RBA's cash rate next Tuesday would be welcomed by many sectors of the economy.
The FHB fall was greatest in NSW and Victoria; down 25% and 23% respectively.
But Queensland bucked the trend with a 3% rise.
A recent Loan Market consumer survey found more than 70% of respondents were expecting an RBA cut in March - and Smith said there has been very little change in that sentiment in the last three weeks.
"The RBA has noted that the banks no longer face the cost of funding pressures that caused them to lift their home loan rates independently of the central bank," he added.
"So if we get a cut in the cash rate on Tuesday consumers will be hoping their lenders follow suit and pass on the reduction in full," Smith said.
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