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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Interest rates on hold

The Reserve Bank of Australia (RBA) left interest rates on hold at 3 percent as predicted.                                                

A  survey by AAP had expected the RBA to leave the cash rate at the lowest since 1960.

Treasurer Wayne Swan said last weekend that it was obvious that rates will rise, while Minister for Financial Services, Chris Bowen, warned yesterday that rates can’t stay low forever.

Some economists believe the first rate rise could come this year, but the general view is that rates will remain on hold until the middle of next year.

In a statement released after the announcement, governor Glenn Stevens said the risk of “severe contraction” in the Australian economy had abated.

“Economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience,” the statement says.

“Measures of confidence have recovered a good deal of ground.”

The statement adds: “The board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances.

“The board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target.”

 

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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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Australia stocks close at seven-month high

The Australian share market closed at its highest level in nearly seven months as better-than-expected local and overseas economic data heartened investors and boosted resources stocks.

At the 1615 AEST close, the benchmark SP/ASX200 index had lifted 60.9 points, or 1.56 per cent, to 3955.3, while the broader All Ordinaries index advanced 61.7 points, or 1.59 per cent, to 3949.6 points.

The last time the local market had closed at those levels was in mid-November 2008.

The local bourse rose as a narrowing current account deficit and improving trade position raised expectations that the Australian economy had managed to avoid a contraction in the March quarter.

Building approvals rose for the third consecutive month as low interest rates and grants from the federal government enticed home buyers.

Resources stocks have been lifted by data released by China on Monday showing that China’s manufacturing activity had expanded in May for the third consecutive month.

In the US overnight, better-than-expected readings on manufacturing, consumer spending and construction spending boosted Wall Street.

The Reserve Bank of Australia, which kept interest rates unchanged on Tuesday, also said there was evidence the global

economy was stabilising and the turnaround was clearest in China.                                                                                                                            

City Index markets strategist Alex Douglas said the positive data releases over the last few days were driving the market.

‘If we go back to yesterday, there was positive data from China.

‘That was backed up with some manufacturing data in the States overnight which was slightly firmer than anticipated,’ Mr Douglas said.

Locally, the building approvals figures were also positive.

‘So little bits of evidence like that of growth emerging – that’s helping to support the markets,’ Mr Douglas said.

In the resources sector, global miner BHP Billiton gained 96 cents to $36.70.

Rio Tinto jumped $2.67 to $69.00 after the company announced it had settled terms of iron ore contracts with many Asian customers.

Oil and gas producer Woodside Petroleum rose 88 cents to $44.90 as it said it planned to retain at least 50 per cent equity in the second and third stages of its Pluto liquefied natural gas (LNG) development at Karratha in Western Australia.

Santos firmed five cents to $14.90.

Among the major banks, Commonwealth Bank strengthened 17 cents to $36.33, Westpac surrendered 18 cents to $18.76, ANZ gave away 21 cents to $15.98, and National Australia Bank gained 28 cents to $22.80.

Investment bank Macquarie Group was up 91 cents at $36.30 as it said it was not aware of any reason or information not already announced that could have prompted a lift in its share price since late last week.

On Wall Street overnight, the Dow Jones Industrial Average index rose 221.11, or 2.6 per cent, to 8,721.44.

In the gold sector, Lihir slipped one cent to $3.30, Newmont lost 24 cents to $6.00, and Newcrest picked up 15 cents to $33.89.

The price of gold in Sydney at 1628 AEST was $US973.85 per fine ounce, down $US10.25 on Monday’s close of $US984.10.

Telco Telstra was off two cents at $3.07, and Optus-owner Singapore Telecommunications shed six cents to $2.50.

Retailer Woolworths ascended 60 cents to $26.00, and Wesfarmers, which owns Coles, was $1.09 heavier at $23.37.

In the media sector, News Corp was 25 cents richer at $14.68, and its non-voting stock improved 20 cents to $12.75.

Consolidated Media lifted three cents to $2.38, and Fairfax gained six cents to $1.26.

Among other stocks, automotive brakes supplier Pacifica Group was steady at 13.5 cents after it said the bankruptcy of car-making giant General Motors Corp in the United States was likely to hurt Pacifica’s earnings in 2009.

The top-traded stock by volume was property developer GPT group, with 74.74 million shares worth $36.4 million changing hands.

GPT was 1.5 cents lower at 48 cents.

Preliminary national turnover was 2.43 billion shares worth $5.85 billion, with 657 stocks up, 412 down and 324 unchanged.

Source www.bigpondnews.com

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Stimulus, rates ‘spur first home buyers’

First home buyers now comprise a record proportion of the residential housing market after responding to low interest rates and the government’s revamped assistance package, economists say.

First home buyers made up 27.5 per cent of all home loans in March, a record since the Australian Bureau of Statistics (ABS) began the data series in 1991, and compared with 26.5 per cent of the total market in February.

The ABS data also showed that the housing market has recovered to its February 2008 levels, when interest rates were still being raised by the Reserve Bank of Australia (RBA) before a series of monthly cuts since September to a 49-year low last month.

The number of home loans for owner-occupied housing jumped to a 13-month high of 59,793 in March.

The 4.9 per cent rise in March was even sunnier than economists’ forecasts of a 4.5 per cent increase.

“The housing industry is one of the more interest rate sensitive sectors and its a positive that the response has so far been rapid,” ICAP senior economist Adam Carr said.

“The result clearly ads weight to the argument that the Reserve Bank of Australia has done enough.

“It’s lost on many that other central banks around the world are cutting aggressively to counteract a breakdown in the transmission mechanism. This isn’t the case here.”

Between September and March, the central bank cut official interest rates by 400 basis points to 3.25 per cent in a bid to stimulate a flagging economy.

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

The ABS data found that total housing finance by value rose by 6.7 per cent in March, seasonally adjusted, to $20.688 billion, while loans to investors rose by 4.7 per cent from a year earlier.

“It’s particularly positive that investors are coming back into the market from low levels,” Mr Carr said.

Housing construction rose 13.9 per cent, or 5,565, year on year.

Lending for new dwellings climbed 2,610, or 8.8 per cent, while lending to buy established homes climbed 51,619, or 3.8 per cent, since March last year.

JP Morgan economist Helen Kevans said the boost to the federal government’s first home buyers grant has lifted demand for housing, particularly for new homes.

“As expected, demand for home loans again was underpinned by first home buyers, owing to the attractive grant and improved housing affordability, stemming from lower interest rates and falling house prices,” Ms Kevans said.

“The bigger grant for new building largely explains the solid 8.8 per cent rise in loans issued for the purchase of new dwellings in March.

“In coming months, we believe grants will continue to underpin demand for home loans, particularly during the June quarter given expectations that the expanded grant will end on June 30, as originally planned,” she said.

The government’s first $10.4 billion stimulus package, unveiled in October, doubled the first home buyer grant for established homes to $14,000, and tripled it to $21,000 for newly-constructed dwellings.

There is speculation the grant for brand new housing will be maintained in this year’s budget while the subsidy increase for established homes is scrapped.

Ms Kevans expects the RBA to cut the cash rate by 50 basis points to 2.5 per cent in the second half of 2009.

www.thewest.com.au

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