Today: 02/12/08

Rates Unlikely To Grow Further

According to the RBA, there could be some financial relief in sight for struggling mortgage holders.
The head of the Reserve Bank of Australia has said that the chances of a Reserve Bank rate rise are non-existent, while the chances of a rate cut are growing, despite another round of opportunistic rate rises from our now dominant banks and expectations of a high inflation reading when the June quarter Consumer Price Index is released next week.

The release of the July 1 board meeting minutes, makes it clear that a rate rise in not in the bank's thinking and not even a forecast 1% or more rise in next Wednesday's June quarter Consumer Price Index will make the bank change its approach. The RBA has predicted inflation will drop to their target level at three per cent, within the next two years. RBA governor Glenn Stevens says the bank may cut interest rates before that.

Bank lending here has slowed dramatically, despite the latest round of opportunistic rate rises from the banks, who all blamed for higher funding costs from the wholesale markets.
Consumer sentiment has worsened in the past month, as have business confidence and conditions. They are at a level last seen on some measures, at the end of the 1991-92 recession.

02/07/08

Australian Housing Market

Melbourne, Brisbane and Adelaide have seen house price growth of over 20% during 2007. While Sydney house prices only gained 5 per cent. The current 10 per cent difference between the median prices in Sydney and Melbourne is the smallest ever recorded. Growth is expected to be weaker over the next year with more interest rate rises on the way.

The number of people in NSW who are at risk of losing their homes has jumped by almost 70 per cent in the last two years. The latest figures from the NSW Sherriff's Office show that a total of 3935 writs of possession were issued last year compared with 2357 in 2005. Writs are issued after a lender applies to the Supreme Court and, if approved, a date is set by which the borrower must vacate the property. However writs do not always lead to repossession and in many cases an agreement is reached between the borrower and the lender.

20/01/08

RBA expected to lift rates in February

RBA is likely to lift the interest rates yet again in February. There is a clear sign of rising inflation, despite the recent share market turbulence.

The Bureau of Statistics said core inflation on the RBA's two preferred measures rose by an average 1.05 per cent over the final three months of last year giving an annual rate of 3.6 per cent.

Such an increase is well outside the bank's comfort zone of 2 to 3 per cent. Rate increase will probably be announced after the next RBA meeting on February 5.
 

30/11/07

Rates left on hold

THE Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 6.75 per cent. However a number of banks and non-bank lenders have increased their home loan rates independently of the RBA. The rising costs of wholesale funds due to the sub-prime mortgage crisis in the US has seen a number of Australian lenders revise their rates.

The Adelaide Bank is one such lender. The South Australian bank has added 25 basis points to the rate on some of the loans it supplies to mortgage brokers, who are expected to pass on the cost to borrowers. "The move by Adelaide is an ominous sign that the major banks are also poised to (independently) lift their variable mortgage rate in the not too distant future,'' RBC Capital Markets senior economist Su-Lin Ong told AAP yesterday. "While buffered by their large deposit base, they too source some of their funding from offshore.''

The RBA last raised rates during the general election campaign in November. It was the 10th time the central bank had raised the official cash rate in the past five years. The November increase pushed the variable home loan rates to an 11-year high of 8.57 per cent.

31/08/07

ANZ rates could rise
ANZ Bank warned yesterday it could raise interest rates on mortgages and other loans if it continues to be squeezed by growing funding costs. The bank’s chief John McFarlane noted that in the past decade banks had been used to paying a premium of around 0.1 per cent over the Reserve Bank's cash rate. The costs borne by banks in raising funds via the wholesale market have soared in the past month as traders in bank bills and other money market instruments have priced in a bigger premium for accessing short-term cash.

The credit squeeze is a direct result of the sub-prime mortgage crisis in the US.

 

29 August 2007

No Sign of Housing Recovery Yet
NEW home sales posted only a marginal increase in July with signs of a recovery in the housing sector some way off, a survey shows. According to a report issued by The Housing Industry Association's (HIA), there has been a 1.5 percent rise in new home sales in July 2007. New homes sales report, based on a survey of 100 residential builders, showed a 1.5 per cent rise in July.

The multi-units sector has seen a growth in sales of 13.5 per cent while sales of detached houses were down by 0.1 per cent. HIA chief economist Harley Dale believes the results to be disappointing and has stated that the home building industry will still take some time to recover.
 

15th August 2007
Australian Home Loan Crisis
According to Aussie Home Loans boss John Symond, recent increases in the cost of borrowing on international credit markets could force the Australian mortgage providers to increase their interest rates beyond increases by the Reserve Bank of Australia (RBA).

Impact of the US housing crisis The sub-prime mortgage crisis in the United States has had a flow-on effect to international credit markets. As it is becoming more expensive for Australian financial institutions, including banks, to borrow money from overseas, they would have to pass on the cost to consumers. Some of the Australian mortgage lenders have already passed on last week's increase in official interest rates to their customers.

Non-traditional lenders would be among the companies hardest hit by a credit squeeze, Mr Symond said. In fact, Bluestone, which specialises in low-documentation loans, has already said it will have to lift its borrowing rates in addition to last week's official RBA increase because of the US sub-prime situation.

And Commonwealth Bank of Australia (CBA) chief executive Ralph Norris today said interest rates could rise. Local mortgage lender RAMS Home Loans Group also announced that the shake-out in global lending markets could have a "material impact" on its profit.  RAMS, which has $14 billion worth of loans, warned of possible problems due to indirect exposure to the low-doc loan crisis in the US.  The company sources about half of the funding for its loans to Australian households from the US market. Shares in RAMS tumbled 20 per cent to $1.41, after it launched on the Australian Stock Exchange less than three weeks ago at $2.50.

According to figures provided by Cannex, only a quarter of all residential home loans in Australia are currently fixed. With the recent interest rate rise and the issue of mortgage funding, the message for consumers would be that if they don't want to worry about rates then a fixed rate could be an option."

 

11 July 2007
Home Loans on the Increase
Despite the growth in property prices and the high interest rates, over 66,000 Australians took out a home loan in May 2007. Economists believe that a number of positive indicators in the Aussie economy have had an influence in this direction. Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates, undoubtedly have made people more comfortable about taking on debt.

In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.  According to the ABS, first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.

The size of the average Australian home loan in May was $268,900. Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.

In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent. In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.

In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
 

20 June 2007
Savings for NSW First Home Buyers
ALMOST 200,000 homebuyers a year will save up to $2000 when buying a home in a surprise $2.6 billion tax cut in the New South Wales State Budget.Mortgage duties and land taxes have been cut in NSW in an effort to boost the property market in the face of rising interest rates.

The Government will abolish mortgage duty on owner-occupied homes from September 1, 2007, offering homebuyers a $138 million saving next year. This amounts to $1000 for a $250,000 mortgage or $2000 for a $500,000 mortgage.

Over the coming four years the Government will also abolish mortgage duty on investment and commercial property, a total cut of $1.36 billion over four years.

The land tax rate will also be cut from 1.7 per cent to 1.6 per cent next year, saving taxpayers $467 million over four years. This will reduce most land tax bills - which apply only to investment or commercial properties - by 6 per cent, or $10 for every $10,000 worth of land value.

20 June 2007
Housing Sector On Its Way Up
THE Australian housing sector is continuing to show growth despite falling home affordability.

The Housing sector rebounded over the March quarter, with total dwelling commencements climbing by 1.3 per cent to 38,639 units, seasonally adjusted, from a upwardly revised 38,126 units in the December quarter, the Australian Bureau of Statistics (ABS) said today. However, in the year to March 2007, total residential construction has fallen by 0.3 per cent, seasonally adjusted.

Master Builders' Australia (MBA), the peak building and construction industry association, said the rise in dwelling commencements was a sign of a turnaround in the industry as the effect of last year's interest rate rises faded. "House builders were becoming more optimistic that the industry could improve, particularly as this figure pre-dates the good news on consumer price inflation and reduced interest rate speculation," MBA chief economist Peter Jones said.
 

9 May 2007
House Prices Showing Growth
After a period of some lull, house prices are slowly moving north. Strong gains have been recorded in most capital cities. According to the Bureau of Statistics House Price Index, house prices across Australia grew by an average 1.1 per cent in the first three months of 2007. Over a 12 month period, house prices jumped 8.6 per cent .

Most capital cities have shown significant gains. Perth was the leader with up to 32.1% growth in house prices over a year. Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year. Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year. In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago. Adelaide house prices climbed 1.7 per cent over the quarter and 6.1 per cent over the year.

In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.Sydney house prices continue to struggle – experiencing on average a price fall of 0.4 per cent in the first quarter, and overall growth of 1.5 per cent over the past year.

4 May 2007
Inflation appears in check
In their quarterly statement on monetary policy the RBA had stated that the three interest rate rises in 2006 had dampened the demand for home loans in Australia. "Household credit growth and housing loan approvals both moderated through the second half of last year though this trend does not seem to have continued into 2007," the RBA said. The RBA had said that favourable economic conditions had contributed to expansion in borrowings by the Australian business sector.

2 May 2007
Rates Left On Hold
The Reserve Bank of Australia has decided to leave interest rates on hold. Most analysts now believe that rates are likely to not move until after the federal elections later this year. The consumer price index (CPI) for the March quarter rose just 2.4 per cent over the year, taking the pressure off the RBA to lift rates again.

Australian economists will be waiting for the RBA's forecast of core inflation in this Friday's quarterly monetary policy statement to determine how much of a risk inflation could pose to interest rates.

2 May 2007
Residential Investment Going Strong
INVESTMENT in residential property is back in favour as data shows record levels of investment during April 2007. There are clearly expectations of further capital gains in 2007 and beyond.

Despite fears about the WA market coming off the boil, investment there continues at near record levels and the average mortgage size broke through the $350,000 barrier last month. There is also growing resurgence in NSW, Victoria and South Australia.

The average home loan nationally now stands at $307,000, with the highest average loans in NSW ($362,000) and WA ($352,000) followed by Queensland (($288,000), Victoria ($277,000) and South Australia ($231,000).


April 21, 2007
House prices remain strong despite rates
A recent survey has confirmed that most Australians are confident that their properties have retained value over the past year despite rising interest rates. Almost two in three Australians, or 60 per cent, thought the value of their home had been maintained over the past 12 months, while fewer home owners believe they are losing value.

Just 27 per cent of respondents thought their property had fallen in value, down from 34 per cent in a December 2006 survey. According to data from the Australian Bureau of Statistics, house prices across the nation rose 8.3 per cent over the 12 months to December 2006. House prices rose in all cities, except Sydney, where they fell a modest 0.1 per cent.

Annually, house prices rose in Perth (up 36.9 per cent), Darwin (up 17.6 per cent), Canberra (up 9.2 per cent), Melbourne (up 8.1 per cent), Brisbane (up 7.1 per cent), Hobart (up 7.1 per cent) and Adelaide (up 6.4 per cent), and fell slightly in Sydney. Most analysts are tipping modest growth in house prices over the year to come, with higher interest rates capping capital gains in all cities.

21 th April 2007
Rising rates contribute to defaults
The Reserve bank of Australia raised interest rates three times last year, which kept home prices down in 2006. While rates were left on hold during April, some analysts are forecasting the Reserve Bank of Australia will again raise rates in May 2007.

As interest rates rise, bank repossessions of properties are rising around Australia, particularly in the outer suburban areas of Sydney and Melbourne, as some Aussies are falling behind on mortgage repayments.


03 April 07
Interest Rate
At its meeting on 3 April, the Reserve Bank Board decided to leave the cash rate target unchanged at 6.25 per cent.

31 March 2007
Australians on borrowing spree
AUSTRALIANS borrowed at the fastest rate in more than three years last month. This is likely to influence the Reserve Bank to raise interest rates as early as next week. According to data provided by the Reserve Bank of Australia (RBA), the total credit provided to the private sector by financial intermediaries rose by 1.4 per cent in February 2007. This was the fastest monthly increase since September 2003.


24 March 2007
Mortgage Defaults on the Increase

An increasing number of Australian households are falling behind in the mortgage repayments. Rising interest rates, record petrol prices and high level of consumer debt are all taking their toll.

Moody's Investors Services has found that 30-day delinquency levels in the fourth quarter of 2006 were on the rise, particularly in December, when seasonal factors such as Christmas spending depleted borrowers' pockets. Moody's said the availability of "easy money" and a relaxation of lending rules had led to many households incurring high levels of debt that were out of line with their ability to repay. Unfortunately the housing loan market remains extremely competitive between banks and non-bank lenders who are introducing new products such as no-deposit finance and equity loans to drive volume and market share. The report said that rapid growth of house values, where borrowers benefited from significant equity build-up in their properties, had come to an end.

It said that while there were spectacular rises in Western Australia, property prices on the east coast were generally flat. The Moody's data shows that consumer mortgage defaults in the non-bank sector is much higher than for banks. It states that the non-conforming lenders' delinquency rate is 2.15 per cent for loans 30 days past due, while the banks' rate is 0.78 per cent.