Any improvement in Australia's housing finance may be momentary as the impact of the latest rate rises flows through, economists have warned.

The Australian Bureau of Statistics (ABS) today reported the total value of home loans approved in October has risen by 1.9 per cent seasonally adjusted. Building approvals also lifted 9.3 per cent in October from September, the bureau reported earlier in the month.

But while loans for new housing construction picked up in October, the urgent need for governments to address supply side policy failures remains, said peak building and construction organisation Master Builders Australia.

"Despite recent signs of stabilisation, any improvement in housing finance is likely to be short-lived as the impact of the latest rate rises flows through," according to Mr Peter Jones, Chief Economist of Master Builders.

He said, "Notwithstanding another small headline increase in October, the total number of finance commitments is barely doing better than tracking sideways following a 25 per cent fall during the past year."

"Housing finance related to new dwellings, that is, for construction or purchase of newly built homes, is not growing at all in trend terms."

Abstracting from monthly variations, the underlying weak level of housing finance must be of concern to the Federal Government, as it prevents the residential building industry from meeting the undersupply of housing, risking higher rents and house prices as more people chase less stock."

He said, "The effect of last month's rate rises will hurt the interest rate sensitive residential building industry which runs the risk of becoming collateral damage as the Reserve Bank tries to head off inflationary effects of an expected mining boom."

"A lack of finance is acting as a handbrake on the industry as the credit squeeze remains operative."

Mr Jones said, "Builders have reported an across the board slowing in sales, including sharp declines in some states."

He said, "Unless there is urgent reform to address bottlenecks, the strong supply response needed to meet demand will not eventuate, with dire consequences for housing affordability."

Master Builders said it supports many of the findings of the Henry Tax Review on housing affordability and will continue to push for the need to address inefficient developer charges, land release regulations and the approvals process as part of reforms to remove impediments affecting the supply of housing.