The Reserve Bank’s campaign to slow the economy continues to bear fruit with housing finance taking a sharp dip in February, amid turmoil in the financial markets and the central bank’s first rate rise of 2008.

February was also the month when the RBA stepped up its anti-inflationary rhetoric with several speeches and commentaries warning that rates would have to rise and go on rising until inflationary expectations were broken. Consumers and home buyers have obviously heeded the call.

Figures from the Australian Bureau of Statistics today showed that the number of loans for people to build or buy homes or apartments dropped 5.9% in February, compared to January.

Market economists had been tipping a small gain of around half a per cent, so they were well wide of the mark.

The total value of lending fell 7.1% in the month: lending to owner-occupiers fell 6% to $14.9 billion, and the value of lending to investors, who plan to rent or resell homes, slumped 9.5% to $6.55 billion (which is bad news for the rental market).

The ABS said the total value of owner-occupied housing commitments (seasonally adjusted) fell by 6.0% (down $952m) in February 2008, following a revised 2.3% rise in January:

The decrease this month was due to falls in purchase of established dwellings excluding refinancing (down $808m or 8.3%), refinancing of established dwellings (down $160m, 3.6%) and purchase of new dwellings (down $2m, 0.3%). This was slightly offset by a rise in construction of dwellings (up $17m, 1.4%).

The number of loans to build new houses advanced 0.6% and the number of loans to buy newly built dwellings rose 0.3%, but they were minor moves. Refinancings, which have been a major factor in home loan growth for the past eight months, slowed as fewer people moved to refinance their non bank lender mortgages with the likes of the NAB or Westpac.

With retail sales down in February, and on an easing trend for three to four months, building approvals turning down and consumer confidence at a 15 year low, the RBA’s campaign is obviously biting.

Real estate agents must be starting to feel pressure on the selling side, while those with strong rent rolls and property management businesses, will be sitting comfortably.