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First home buyers shied away from the housing market in November as government grants waned and rising mortgage rates took their toll.

And home buyers will have another rate rise to budget for following the central bank’s board meeting on February 2, economists say.

New loans taken out by owner occupiers fell 5.6 per cent to a seasonally adjusted 59,516 in November, the Australian Bureau of Statistics (ABS) said on Tuesday.

It was the second monthly fall in a row and the smallest number of new housing finance commitments in a month since February 2009.

ANZ economist Alex Joiner says new mortgages were down as first home buyers departed the property market.

The share of first home buyers of all mortgages approved in November was 22.1 per cent, down from 26.0 per cent the previous month.

It was the lowest proportion of first home buyers since October 2008.

Dr Joiner said low interest rates and government grants had “bought-forward” a lot of first home buyer activity earlier in 2009.

“Consequently, what we are now starting to see is an equivalent slump in first homebuyers in the first half of 2010 after the expiry of the ‘boost’ at the end of last year.

“Further, interest rate hikes will also have a disproportionately large impact on the first homebuyer segment as these purchasers tend to be closer to their maximum borrowing capacity than either upgraders or investors.”

In November, the Reserve Bank of Australia lifted the cash rate to 3.5 per cent from 3.25 per cent, the second rate rise in as many months.

It raised it again in December leaving the overnight cash rate now at 3.75 per cent.

On October 1, the federal government lowered its first home buyers boost scheme from $14,000 to $10,500 for existing homes and from $21,000 to $14,000 for new dwellings.

It has been $7,000 from January 1 this year.

Commonwealth Bank senior economist John Peters says loans to existing owners and investors should keep rising in 2010 as mortgage rates stay at relatively low levels historically despite expected rate rises.

“And this factor will operate positively in conjunction with increasing consumer optimism (well based) that the economy will pick up momentum in 2010 and that the labour market will remain resilient with unemployment rate unlikely to move much higher than six per cent,” Mr Peters said.

“This encouraging news for households about their job and wage prospects will help engineer plenty of trade-up housing moves by consumers in 2010.”

The only sector to increase in November was investment housing, with the value of loans rising 2.1 per cent to $6.284 billion, the ABS said.

Mortgage Choice chief executive Michael Russell says the rise in investor housing finance is “terrific” despite the possibility of higher interest rates in 2010.

“Rental yields and capital growth opportunities plus less competition from first homebuyers are encouraging property investors to emerge from their waiting game,” Mr Russell said.

JP Morgan economist Helen Kevans said the Reserve Bank of Australia (RBA) would expect some weak home loans data over the coming months yet it would not deter it from lifting interest rates.

“I don’t think it will change too many calls for the RBA’s February move, we’re expecting a hike February.”

The RBA’s next monthly board meeting is scheduled for February 2.