Housing finance edged up in September, but a housing group has claimed the result masks weak demand for new homes.

ABS data released yesterday showed a 2.2% seasonally adjusted rise in owner occupied housing finance. Master Builders chief economist Peter Jones, however, said the figures also indicate continuing decline in new housing finance.

"The key finance indicator released today by the ABS shows that demand for new dwellings remains flat, despite a rise in the headline figure. Loans for construction of dwellings and purchase of new dwellings, combined, fell in September and remain down on the same month a year ago," Jones said.

The ABS data shows loans for the construction of new dwellings fell 0.2% in September, while loans for the purchase of new dwellings declined 0.7%. The rise in owner occupied finance was driven by a 2.6% increase in loans for the purchase of established dwellings.

Jones said the housing figures, which pre-dated the RBA's November rate cut, showed "consumer caution and overseas events" undermining recovery. He stated that further action from the RBA could be necessary to sufficiently stimulate demand.

"Last week’s rate cut will help but Master Builders believes the Reserve Bank needs to do more to boost confidence and encourage an upswing in housing," he said.