The Reserve Bank's experimental series counting mortgage approvals seems to be providing early evidence this is now happening (the series counts about 94% of all mortgage approvals).

The series reached its nadir in June last year when the number of approvals was running at more than 25% below the previous year and then showed a steadily improving trend through to mid-June this year.

For example, in the 13 weeks ended June 12, approvals were 13.3% higher than in the same 13 weeks a year earlier. The 7,809 approvals in the week ended June 12 compared with the 5,540 approvals in the week ended June 6, 2008.

But since mid-June the series seems to be trending down again. Approvals in the 13 weeks ended July 3 were up only 6.2% from the same 13 weeks a year earlier and the 7,078 approvals in the week ended July 3 was down considerably from the 7,809 in the week ended June 12.

"This is an indication the interest rate support we've seen in the last few months is waning," says Dominick Stephens at Westpac, adding the caveat that the approvals numbers are very volatile. In early June, Stephens published a report called "Flash in the Pan" which argued the recovery wasn't sustainable.

Illustrating how dramatic those interest rate falls were, Westpac's two-year fixed rate dropped from 9.70% in May last year to 5.90% between late January and late March. It has since climbed to 6.25%.

The good news is net immigration has been stronger than Stephens expected, which means the housing market isn't likely to slow from here as much as he had previously expected.