* RBA to consider cutting interest rates at June meeting
* Financials soar as regulator eases home loan lending criteria
* Australian benchmark at highest close since December 2007 (Updates to close)
By Rashmi Ashok
May 21 (Reuters) - Australian shares advanced on Tuesday, boosted by financials after mortgage rules were eased in a bid to spur borrowing and the chance of a June interest rate cut increased.
The S&P/ASX 200 index shed early losses to rise 0.4% or 24 points to 6,500.1, hitting its highest closing since December 2007. On Monday, the benchmark surged 1.7%.
In a highly anticipated speech, RBA Governor Philip Lowe said the central bank would consider the case for lower interest rates in June, adding that a lower cash rate would support employment growth and help meet inflation targets.
ANZ, in a note, said “This is as clear a signal as the RBA ever delivers. We think the RBA will cut in June.”
In ANZ’s view, the central bank will want to see the combined impact of a rate cut, lower taxes and eased mortgage rules does before it makes another move.
Financial stocks surged 1.7%, helped when the Australian Prudential Regulation Authority (APRA) proposed relaxing the rules for how banks check people’s ability to service home loans.
Lenders rose on the expectation that the easing would boost borrowing and help combat a sustained drop in house prices and record-low credit growth.
Lowe also said the proposed easing of lending criteria by Australia’s prudential regulator would be “complementary” to a rate cut, if it takes effect.
The “Big Four” banks surged. Commonwealth Bank of Australia gained 2% and Westpac Banking Corp jumped 2.7%.
Australia and New Zealand Banking Group added 2.1% and National Australia Bank 1.5%.
The proposed easing in home-lending criteria also spurred shares of home-builders. Property developer Stockland Corporation surged 3.4%.
Construction materials makers Adelaide Brighton, James Hardie Industries and CSR were among top percentage gainers on the benchmark, rising between 3-5%.
But rising Sino-U.S. trade tensions capped gains on the index. Energy stocks and iron ore miners slumped as the demand outlook turned shaky.
The tensions boosted prices of gold, a safe-haven investment in times of market turmoil, and gold stocks soared.
Newcrest Mining rose 0.5% and Northern Star Resources gained 2.3%.
New Zealand’s benchmark S&P/NZX 50 index fell 0.2% or 18.06 points to finish at 10,216.09.
Dairy firms Synlait Milk fell 1.9% while a2 Milk Company shed 0.7%. (Editing by Richard Borsuk)