Reserve tipped to bump up rates

Homeowners face finding another $50 a month to pay the mortgage, with the Reserve Bank tipped to lift official interest rates again today as it battles to dampen house prices and keep inflation pressures at bay.

A quarter percentage point rise this afternoon would mean official rates would have climbed 1.25 percentage points since October, adding more than $240 to the monthly repayments on a $300,000 mortgage.

It would be the biggest run of increases in a 12-month period since the Reserve took the official cash rate from 5 per cent to 6.25 per cent between November 1999 and August 2000.

But the decision could be a close call, with signs of softness in the retail and building sectors lifting expectations the Reserve may wait at least another month before moving in the week before Treasurer Wayne Swan hands down the Federal Budget.

At least mortgage holders may be saved from a “super-sized” lift to their repayments, with the NAB yesterday saying it would not increase its rates more than any move in the official cash rate. Its recent policy of matching rate rises had led to more customers.

That prompted Mr Swan to challenge other major banks to follow NAB’s lead.

TD Securities senior strategist Annette Beacher expects the Reserve board to hold rates today.

But Macquarie Bank rate strategist Rory Robertson said the chance of a rate rise was about 80 per cent.

“Interest rates here remain unusually low, our jobs market is strengthening, China and bulk-commodity prices are booming, so, too, local home prices, and the world’s biggest economy increasingly is getting back on its feet,” he said.

A new survey from Dun and Bradstreet of business executives out today shows sales, growth, employment and capital investment expectations all rising. 

Source  :  www.thewest.com.au

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Perth properties quickest to sell

Perth properties are being sold quicker than any other state capital, new figures show.

Research from property analysts RP Data and Rismark International shows it took 24 days to sell a house in November and two days fewer for units.

The time taken to sell a unit was the quickest in Australia, while only in Canberra (23 days) were houses sold quicker.

The average price for houses and units in the metropolitan area at the end of November was $460,000.

While that was a drop of 1.09 per cent on October, making Perth the only city where prices fell, it was still an increase of 6.47 per cent on the start of the year and a 5.87 per cent rise on the same time in 2008.

The average house price was $485,000, down 1.11 per cent on October, but up 5.94 per cent since the start of 2009, while units dropped 1 per cent on October, but rose 8.55 per cent in 2009, to average $385,000.

The news was not all good for homeowners. Landlords found rental yields dropping, to 3.94 per cent for houses and 4.41 per cent for units, both down 0.04 of a percentage point on October.

Rismark managing director Christopher Joye said the key drivers in the market in the latter half of 2009 were upgraders and investors, and this was expected to continue this year.

Once mortgage rates “normalised” to between 7 per cent and 8 per cent, price growth would drop back. As many borrowers did not reduce mortgage payments when rates fell, they should be well placed to absorb rises.

Source  :  www.watoday.com.au

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Queensland low bucks the Australian home loan trend

THE average new mortgage in Australia has hit an all-time high of $367,000 according to mortgage broker Australian Finance Group.

But Queenslanders have been more conservative than the rest of the country, with the average new mortgage in Queensland sitting at $325,000.

The average home loan in New South Wales is now $433,000; in Western Australia it is $391,000 and $386,000 in the Northern Territory.

Australians have been increasingly taking on bigger mortgages, with the average new home loan 6.4 per cent larger than it was in May 2009.

Queensland bucked this trend, however, with new mortgages taken out in November $10,000 smaller than the previous month and close to the state’s January low of $323,000.

Home loans in both Victoria and New South Wales grew since May – up 12.1 per cent and 10.7 per cent respectively.

The news comes after the Reserve Bank of Australia announced on Tuesday that it was lifting the official cash rate for the third successive time.

The latest 0.25 per cent rise, when passed on by lenders, will cost home-owners with a $367,000 mortgage on a standard variable rate an extra $56 a month, while those slugged with a 0.45 per cent rate hike face an increase of $102 per month.

First-home buyers accounted for just 13.7 per cent of all new mortgages in November, down from their peak of 28.1 per cent in March.

Investors have been steadily returning to the property market over the past four months and represent a third of all new mortgages in November.

Of those who took out a new mortgage in November, only 2.1 per cent opted for a fixed-rate, down from 3 per cent the previous month.

Total numbers of new mortgages were lower than previous months.

Mark Hewitt of Australian Financial Group said: “October and November are seasonally strong months in the calendar, but we’ve seen two straight months of decline.

“Larger average mortgages and greater activity by investors are usually signs of a confident market but confidence is still fragile.

“We believe the RBA hiked rates too quickly and too soon.”

Source  :  www.thenews.com.au

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ANZ lifts interest rates

The ANZ has become the first major bank to lift its mortgage interest rates, announcing this morning it will lift rates by a quarter percentage point.

Following the Reserve Bank’s decision on Tuesday to lift the official cash rate, all the big four had held fire on following suit – until today.

The ANZ tried to dampen the pain of the move, saying it would also increase interest rates on some of its deposit products by a half percentage point.

The increase on ANZ mortgages, which will take the standard variable rate to 6.06 per cent, will kick in from next Monday.

As well, fixed rate mortgages at ANZ will go up by a quarter percentage point – to 5.7 per cent for a one year fixed rate mortgage and 6.69 per cent for a two year mortgage.

Longer term mortgages will go up less, while the 10 year term rate will be cut by a quarter percentage point.

Treasurer Wayne Swan had warned all banks against lifting their mortgage rates by more than the Reserve Bank’s increase in the official cash rate.

Source  :  www.thewest.com.au

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RBA lifts rates

The Reserve Bank has raised its key interest rate, making Australia the first developed nation to reverse the cycle of cuts triggered by the global financial crisis. Analysts say more increases are on the way.

Today’s 25-basis-point rise pushes the central bank’s cash rate to 3.25 per cent in a move that will add $40 to the average monthly payment for a typical $300,000 mortgage if it is passed on by commercial banks. The extra cost may stretch household budgets at a time when unemployment remains on the rise.

All four of the big banks – Commonwealth Bank, Westpac, National Australia Bank and ANZ – said they have placed their variable interest rates under review.

Source  :  www.watoday.com.au

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Stamp duty on home loans under review

STAMP duty on housing loans could be abolished after the Henry tax review, which is likely to recommend states be given a share of income tax to make up the difference.

The most likely path to do this would be for the Commonwealth to give the states the ability to impose their own surcharge on income tax, which would be collected for them by the Australian Tax Office.

 The Henry review has been inundated with submissions calling for the end of stamp duty.

Tax economists argue that the tax on moving house, although easy to collect, leads to poor use of the housing stock and poor labour mobility, The Australian reports.Having to pay stamp duty not only discourages elderly people from moving to more appropriate accommodation, it also deters people from moving house to a better jobs market. 

At a conference conducted by the Henry tax review at the Melbourne Institute last week, both international and Australian tax economists said stamp duty should go, with Melbourne University professor John Freebairn describing the tax as “a piece of garbage”.

The review panel is being influenced by state submissions arguing that replacing stamp duty by extending other state taxes, such as payroll tax or land tax, would be too difficult to implement nationally.

Tasmanian Treasury secretary Don Challen, who is close to the inquiry’s head, federal Treasury secretary Ken Henry, told last week’s conference that reform of state taxes would succeed only with leadership from the national government.                                                                                                                                                     

“If you want to achieve a difficult reform, you’ve got to make it a national one,” Mr Challen said.

He said it would be too hard to win political consensus to extend land or payroll taxes.

“It requires eight lots of political commitment and eight lots of legislation and that path is doomed to failure,” he said.

However, he said he believed states would be willing to act on stamp duty if the commonwealth provided an avenue for alternative revenue.

The idea of giving states a cut of income tax was pressed two years ago by the OECD, which suggested the states “piggy-back” on income tax. The OECD also urged states to drop stamp duty.

One of the world’s leading experts on federal taxes, Canada’s Richard Bird, said the states were heading for a financial crisis because they did not have a sufficient tax base to support their burgeoning health and education costs, which were all rising much faster than the consumer price index.

One of the problems with stamp duty for the states is that it is vulnerable to the state of property markets.

Stamp duty usually raises about $14 billion a year for the states, but the recent state budgets showed big falls of more than $1bn each in NSW and Queensland, in 2008-09, for example.

“In Australia, it should certainly be feasible to permit states to impose a surcharge on the federal personal income tax base,” Professor Bird said.

He said that, ideally, Australia would follow the Scandinavian practice of allowing states to have a flat tax surcharge on income, rather than mirroring the commonwealth’s progressive taxation.

The states would be allowed to set their own level, making states more responsible for their own finances.

Source  :  www.news.com.au

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Swan slams ‘selfish’ CBA rate decision

Treasurer Wayne Swan has taken aim at Australia’s biggest home lender, labelling it selfish for lifting its mortgage and business lending rates. 

Other banks have refused to rule out following the Commonwealth Bank of Australia’s (CBA’s) surprise decision to lift its home and business loan rates by 10 basis points to offset higher funding costs.

The opposition said the government’s huge debt burden was putting pressure on interest rates, while a prominent market economist said it may force the Reserve Bank of Australia (RBA) to cut the official rate again to counter any impact from CBA’s move.

CBA said it took Friday’s decision “reluctantly”, but at a standard variable mortgage rate of 5.74 per cent, up from 5.64 per cent, it was still the lowest on the market.

The rate hike will add $18 a month to repayments on a $300,000 home loan over 25 years.

The bank said it had absorbed as much of its additional funding costs for as long as it could.

“Unfortunately, we have seen the bank’s wholesale funding costs remain high and continue to increase as previous long term funding matures and is replaced with new funding at significantly higher cost,” CBA group executive of retail banking services Ross McEwan said in a statement.

Such reasoning drew no sympathy from the treasurer.

There are ups and downs when it comes to those decisions over time, but there are few decisions I can think of that are more selfish than this one,” Mr Swan told reporters in Brisbane.

“I think Australians, rightly, will be furious with the Commonwealth Bank.”

Prime Minister Kevin Rudd echoed those sentiments during a speech to a business lunch in Brisbane.

“We are all in this together – businesses, workers, government and the Reserve Bank – and today’s decision by the Commonwealth Bank runs counter to this nationwide effort,” Mr Rudd said.

The other three major banks – ANZ, National Australia Bank and Westpac – said their rates were constantly under review.

NAB said it had no current plans to raise its home loan rate but noted “all Australian banks” had been incurring significantly higher funding costs for some time.

Opposition treasury spokesman Joe Hockey said the government was putting pressure on interest rates by running up a huge debt.

“Kevin Rudd and Wayne Swan feigned outrage about this interest rate increase, yet they are directly responsible for it,” Mr Hockey told reporters in Sydney.

“This is the beginning. You will end up with higher interest rates directly as a result of the spending binge of the Rudd government and the massive debt they are accruing.”

Home buyers may be enjoying the lowest mortgage rates in 41 years, but have already missed out on about 30 to 40 basis points of the RBA’s total 425 basis points of official rate cuts, with banks refusing to pass on the cuts in full because of the cost of funding.

For small businesses it has been even worse, being short changed by about 140 basis points.

The CBA’s decision comes in a week that saw massive boosts to both consumer and business confidence, as well as data showing sustained growth in home lending – sucked in by low mortgage rates and a more generous first home owners grant.

April mortgage data showed loan demand has grown for seven straight months to a 14-month high, as well as record demand from first home buyers and the strongest interest from investors in nearly two years.

It also showed that the banks have cornered more than 92 per cent of all loans – a 33-year high.

Westpac chief economist Bill Evans said CBA’s decision could well be countered by another cut by the RBA.

“If it does have an impact, particularly on confidence in the housing market, which has been the most encouraging source of recovery in the Australian economy, it may bring a rate cut back on the table at the Reserve Bank,” Mr Evans told Sky News

Source  :  www.thedaily.com.au

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First-homebuyers urged to take mortgage help on board

An innovative house and land finance package developed in Perth could help more first-homebuyers to secure a home loan reduce their loan repayments. 
  
Based on a four-bedroom, two-bathroom home using part of the home as a rental, therfore allowing first-homebuyers  to afford a buy, part of the home is sealed off from the rest, creating a rentable one-bedroom, one-bathroom home.
  
The rent is taken into account when assessing borrowing capacity and surplus income can be used for bigger mortgage repayments.
  
Housing Edge director Dennis Ward-Fay said the new approach would bring home ownership within the reach of many more first-homebuyers.    
  
“Every application has to be assessed on its own merits but as an example the top four banks would require a couple borrowing for a house and land package valued at $380,000 to be earning an average salary of $63,275. The same couple applying for a Housing Edge loan would require a combined salary of only $56,510.
  
“The home can easily be converted back to a standard four-bedroom, two-bathroom home at a later date if the owners wish,” he said.
 
Homeowners are advised to use a property manager to handle the rent collection and tenancy details.

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