Lending to consumers and business has slowed to the worst annual pace in 15 years despite the lowest interest rates in more than 40 years, central bank figures show.

Private sector credit rose just 0.1 per cent in March, after a flat result in February, according to figures released by the Reserve Bank of Australia (RBA) on Thursday.

The annual growth rate was 4.9 per cent, the slowest since January 1994 when total credit grew by 5.4 per cent, in seasonally adjusted terms.

The monthly data was barely in positive territory, thanks to ongoing momentum in lending by financial institutions for housing.

Housing credit was up 0.6 per cent in the month, and 7.2 per cent over the year, has first home buyers looked to take advantage of the federal government’s boost to first home owner grants, which are set to expire at the end of June, and low mortgage rates.

But personal and business lending remained soft, as lending for margin loans declined and companies found it harder to access credit.

CommSec economist Savanth Sebastian said the rise in housing sector credit was the only bright spot in the central bank data.

“If you had to look for any encouraging signs in the latest credit data it would be buried deep within the statistics on housing credit,” he said in a note.

“The additional first home owners boost, coupled with interest rates at the lowest level in almost half a century, has resulted in an improved disposition by first home buyers.”

Lending to business fell 0.6 per cent in March and personal credit declined by 0.3 per cent.

In April, the RBA cut the cash interest rate by 25 basis points to three per cent - a 49 year low.

The central bank board meets next Tuesday to discuss monetary policy but is not expected to cut rates further.

Mr Sebastian said the March rise in housing sector credit will encourage the RBA leave the cash rate steady.

“Demand for homes is soaring in some areas, pushing prices higher and weakening housing affordability,” he said.

“The global economic outlook seems to have improved rather than having deteriorated since the last RBA meeting.

“The RBA is likely to leave rates on hold next week and await more timely economic data in the next couple of months.”

An economist at financial market research group Forecast, Michael Turner, said previous RBA rate cuts had helped keep credit flowing in the market.

“Overall, credit growth was pretty soft, but the main thing holding it all together is first home buyers,” he said.

“At the moment, the first home buyers grant and the massive reduction in interest rates seems to be doing a good job of keeping the money flowing.

“Nothing in today’s data would change rates being on hold.”

Personal lending fell 6.2 per cent over the year to March while business credit was up 4.1 per cent.

AAP