Homeowners cope with mortgage repayments as interest rates climb

Australian homeowners could cope with higher interest rates and a downturn in the economy, the nation's top banker forecast last night.
Reserve Bank governor Glenn Stevens blamed the housing bubble, which has burst in some states, on banks giving away mortgages too cheaply.
Three interest rate rises this year, ordered by the Reserve Bank, are expected to knock some confidence out of the market which has started to return to health. There is speculation a fourth rate rise could hit as early as February. Mr Stevens said easier and cheaper access to loans was a prime reason for the skyrocketing prices of Australia's 8 million existing dwellings.
However, he said while some households had too much debt, there would not be great damage if the economy began to decline. The prediction was based on a Reserve Bank analysis, which tipped people would trim their spending habits rather than lose their house. Economists are now punting that the Reserve Bank could order yet another rates rise in a bid to cool the economy. Slower economic growth could halt that move but the jobs market in Australia remains red-hot. Mr Stevens gave no clear direction on the future movements of interest rates.
However, there was a hint that the central bank thought Australian households could cope with higher rates -- particularly through the indication that people would reduce their spending. Mr Stevens said the higher level of debt people had built up made them vulnerable to small changes in the economy. "A very large change in the household sector's balance sheets has made households more sensitive to changes in their circumstances,'' he said.
The RBA has tipped that if there was an economic downturn, it would be businesses which would be hit the hardest. Businesses supplying into discretionary consumer markets would feel the effect quite quickly, Mr Stevens said.

Source: Herald Sun

Mortgage brokers rise to Australia's first choice according to survey

Mortgage brokers are becoming the first choice for home buyers when they're arranging a loan, a survey shows.
The Mortgage Industry Association of Australia(MIAA)/BankWest home finance survey released today showed more than 41 per cent of recent or intending homebuyers would go to a mortgage broker.
That figure compares with 37.5 per cent who regarded banks as their first preference.
MIAA chief executive Phil Naylor said the figures showed a rise in the public acceptance of brokers. "Public awareness of brokers is now more than 90 per cent," he said.
It is the first time the survey has shown homebuyers prefer arranging their loan through a broker rather than going straight to a bank.
BankWest's head of broker sales, Phil Colton said the research highlighted that banks really couldn't afford to ignore the broking industry.
The research shows that borrowers preferred brokers mainly because they did all the legwork for customers, but also because they could offer a range of loan options from different lenders. The MIAA/Bank West survey is conducted twice a year.
Source: AAP

Lower home loan demand won't affect interest rates

A fall in applications and approvals for housing loans in August was unlikely to have an effect on [reducing] interest rates, economists said today.
Housing finance commitments for owner-occupied housing fell 1 per cent in August, seasonally adjusted, to 63,217, the Australian Bureau of Statistics said.
Total housing finance by value fell 1.3 per cent in August, seasonally adjusted, to $19.852 billion.
Housing finance by value for owner occupation fell 1.3 per cent, adjusted, to $13.956 billion.
Economists had been looking for a 1 per cent fall in the number of housing finance commitments for owner-occupiers.
Macquarie Bank senior economist Brian Redican said the data was in line with the Reserve Bank of Australia's (RBA) interest rate hike to 6.0 per cent in August.
"It's really not surprising given that the Reserve Bank was raising interest rates in August and that there were some more dire warnings about the housing market there," Mr Redican said.
"But this kind of decline after some healthy months won't pose any concerns for policy makers so I don't think it will have any influence on the current policy debate."
Commonwealth Bank senior economist Michael Workman said the modest fall indicated there was still some underlying strength in the housing market.
"If anything, this is still one of those things indicating that the economy still has a fair bit of momentum," Mr Workman said.
"And it's just one of those issues that would easily stack into this view there are no signs of weakness that could delay a rate rise."
Citigroup director and strategist Stephen Halmarick said the RBA would be pleased with the results, with the August rate hike appearing to have softened the market.
"I think the data so far from the August rate hike has shown there is a little bit of reduction in momentum in the household part of the economy, but it's not dramatic," he said.
However, he said new RBA governor Glenn Stevens would likely signal a continuing tightening bias in his speech tonight at the Australian Business Economists' annual forecasting conference.
"But that bias remains a patient one," he said.
He said the RBA would likely watch further developments before making another rate move.
He said Citigroup did not expect rates to rise again this year, although the tightening bias was expected to remain into next year.
Source: AAP

Australian Home sales bounce back

New home sales in Australia rose last month thanks to strong improvements in housing markets in New South Wales, Victoria and Queensland markets, figures show.
The latest Housing Industry Association's (HIA) new home sales survey shows sales of new homes and units by Australia's largest builders and developers rose by 1.3 per cent in October to 7434 dwellings.
That followed a fall of 3 per cent to a 21 month low of 7342 dwellings in September.
The survey also found that new house sales increased by 4.6 per cent in October while sales of multi-unit fell by 16 per cent.
HIA executive director of economics and housing Simon Tennent said the results reflected the dual nature of the nation's economic growth and housing affordability across the states.
"New home sales were resilient in the eastern states as house prices continue to grow in line with consumer prices," he said.
New South Wales, Victoria and Queensland detached housing sales were up strongly, while the accelerating house prices and land constraints in Western Australia meant the new home sales market continued to struggle, he said.
In October, detached house sales fell by 21.9 per cent in WA and 0.9 per cent in South Australia but rose by 16.7 per cent in NSW, 15 per cent in Victoria and 8.5 per cent in Queensland.
"The real test will be in the first quarter of 2007 when the combined affect of three interest rate rises start to squeeze household budgets, particularly in the resource-poor states," Mr Tennent said.
The Reserve Bank of Australia lifted interest rates this month by 25 basis points to 6.25 per cent.
That followed hikes by the same amount in May and August.
Economists say it is not likely that the RBA will lift rates again at the first board meeting of the year in February as the RBA will want to see how the three hikes have trickled through the economy.
Source: AAP