Persistent weakness in the home finance sector should provide another reason for the Reserve Bank of Australia (RBA) to cut official rates on Melbourne Cup day, according to mortgage broker Loan Market.

The latest official home loan approval figures from the Australian Bureau of Statistics (ABS) shows a 1.2 per cent rise for August 2011.

Loan Market Chief Operating Officer Dean Rushton said while it was a positive to see home loan approvals rise following a 10 year low in the March quarter year on year, it needs to be kept in the context of the current baseline.

“We are still in a subdued period with the number of housing commitments for the year on year to August 2011 falling 5.2 per cent,” he said.

“The last 12 months have been the most challenging the home finance sector has experienced in the past decade.”

“While it’s encouraging to see some growth in the number of finance commitments in the short term and we’re certainly starting to see some activity return to the market, there’s still mixed signals. Enquiry levels and loans applications remain subdued.”

Mr Rushton said one of the major influences on the home finance market was prospects of the RBA lowering the cash rate from its present level of 4.75 per cent in the near future.

“A rate cut on Melbourne Cup day by the RBA will without doubt boost confidence in the economy over the last few months of the year,” he said.

“There is ample evidence the RBA needs to act on the cash rate on November 1. “