Interest rates have risen twice times since our last Newsletter and are likely to rise again in the coming months. The general opinion amongst economists and finance industry experts is that average interest rate will rise from the current 6.5% pa to around 7% in the next few months. So if you are thinking about fixing your interest rate there are several factors to take in to consideration.
- What is the expected break even point?
- What will rates need to rise to for you to be in the black?
- What is my lenders current fixed rate for 3 or 5 years?
For a guide on calculating these answers check the Calculators on our web site for the Fixed vs Variable Interest Rate Calculator . You can increase rates whenever you want through the 5 year term and watch the numbers change. There are also a couple of links to the ABS with stats on historic interest rates.
Happy reading.
Richard and the team.
The red-hot east coast auction markets continued unabated on the weekend as investors snapped up anything with four walls and a roof. Read more ... The Shack - Holiday homes in a moving market - You work hard, you save a little, you find a bit extra in the pay packet each month and you start gazing weekend-ward to letting go of a small part of your disposable income on an escape hut. Face it, your parents were wrong… you're not special, you're typical. Read more ... (
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The first newsletter for 2010 from RBHM lawyers. There are some articles that are worthwhile reading for business owners. David Beale can be contacted on (02) 9957 3685. Read more ... ( 229K)The managing director of Australand Property Group, Bob Johnston, has added his voice to the chorus of industry leaders warning that property prices will stall this year. Read more ... The Housing Industry Association has voiced concerns over the pace of interest rate rises after a new report showed residential building work slumped 2.5% in the December quarter. Read more ... A leading Australian mortgage insurer has spoken out against recent reports that first homebuyers would struggle to find finance this year. Read more ... A new report by Australian Property Monitors shows that rising interest rates and property prices are forcing more potential owner-occupiers into the rental market. Read more ... Economists are forecasting that a new consumer survey, to be released on Wednesday, will show a slump in confidence in the economic outlook, driven largely by rising interest rates. Read more ... Complaints from industry and commercial brokers about tougher lending criteria for small businesses have sparked a senate inquiry into access to small business finance. Read more ...
Tim Lawless from RPData gave a presentation to MFAA Members at the Kirribilli Club on Wednesday 21st about the Australian property market. A very interesting presentation with worthwhile data. Here is his presentation (
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Source: RP Data & Mortgage Business Magazine
Darwin |
Brisbane |
Sydney |
Canberra |
Melbourne |
Adelaide |
Perth |
|
| HOUSES | |||||||
| Median House Price | $538,857 |
$488,301 |
$626,555 |
$546,489 |
$531,187 |
$445,243 |
$517,554 |
| Quarterly growth | 3.80% |
2.51% |
2.32% |
4.59% |
4.21% |
3.37% |
0.23% |
| Annual growth | 12.45% |
8.83% |
11.33% |
12.71% |
16.16% |
8.23% |
7.08% |
| Average annual growth | 14.35% |
9.44% |
2.53% |
7.05% |
7.19% |
8.46% |
10.97% |
| Median Weekly Rent | $568 |
$391 |
$550 |
$504 |
$461 |
$337 |
$391 |
| Gross rental yield | 5.48% |
4.16% |
4.56% |
4.79% |
4.51% |
3.94% |
3.93% |
| UNITS | |||||||
| Median Unit Price | $412,484 |
$348,440 |
$464,276 |
$435,385 |
$426,044 |
$369,974 |
$474,100 |
| Quarterly growth | 6.74% |
-1.87% |
0.35% |
3.12% |
4.58% |
2.43% |
-3.95% |
| Annual growth | 20.32% |
4.30% |
7.59% |
17.68% |
16.35% |
6.81% |
6.15% |
| Average annual growth | 17.19% |
9.05% |
3.19% |
8.14% |
7.11% |
11.43% |
12.17% |
| Median Weekly Rent | $437 |
$350 |
$469 |
$404% |
$367% |
$334 |
$397 |
| Gross rental yield | 5.51% |
5.23% |
5.26% |
4.82% |
4.48% |
4.69% |
4.35% |
Source: Broker News
Australian banks have warned that new liquidity and asset rules, instituted by the Basel committee, could have the effect of increasing costs and pushing up interest rates.
The Australian Bankers’ Association (ABA) is seeking amendments to the new regulations, which could force Australian banks to fundamentally alter their funding models.
Under the Basel rules, banks with a greater proportion of “high-risk” assets would be required to source more “secure” (and expensive) long-term funding. Home mortgages have been put in the high-risk category, whereas loans packaged up as securities are deemed much lower risk, even though the underlying assets are the same.
This is a problem for Australian banks as they tend to hold most of their loans directly on their books. US and European banks are much more likely to bundle their mortgages.
The deadline for comment on the rules was last Friday. The ABA is understood to be seeking an extension.
Source: Broker News
The red-hot east coast auction markets continued unabated on the weekend as investors snapped up anything with four walls and a roof. The Real Estate Institute of Victoria put Melbourne's clearance rate at 85%, compared to 78% for the same weekend last year.
In Sydney, the clearance rate was 68%, according to APM. In Melbourne, the heaviest demand was felt in wealthier suburbs such as Malvern East, Toorak, Brighton and Kew, where supply is extremely tight. More than 100 properties sold for over $1m in the Victorian capital.
A number of industry leaders, including developer groups, economists and REIA have recently issued warnings about overheated property prices. "Interest rates, population pressures, volcanoes – I'm not sure what is going to stop this speeding train," said Mal James of James Buyer Advocates. "It does need to and should slow down some time."
Source: Broker News
The managing director of Australand Property Group, Bob Johnston, has added his voice to the chorus of industry leaders warning that property prices will stall this year.
Jonston dismissed the argument that undersupply would continue to push prices upwards. He claimed that un affordability, driven by rising interest rates, would play a much greater role in shaping the direction of the market.
Australand would largely avoid luxury developments this year, Johnston said, focusing on affordable housing. “Demand in the more affordable market segments is expected to be sustained,” he said.
Around 90% of Australand’s forthcoming projects are pitched at the affordable or mid-tier markets.
Source: Broker News
The Housing Industry Association has voiced concerns over the pace of interest rate rises after a new report showed residential building work slumped 2.5% in the December quarter.
New South Wales suffered the most with a drop of 5.3%, followed by South Australia on 4.8% and Victoria on 3.3%.
Both houses and units saw declines in construction. House building was down 1.1% to $6.2bn and unit building down 5.8% to $2.6bn.
HIA chief economist Harley Dale warned of the shaky prospects for a post-stimulus housing recovery. “Recent updates have highlighted falling new home lending, sluggish housing credit growth, and a loss of momentum in building approvals and new home sales,” he said.
“That’s not good news for a sustainable new home building recovery and highlights the need for a cautious approach to interest rates."
Source: Broker News
A leading Australian mortgage insurer has spoken out against recent reports that first homebuyers would struggle to find finance this year.
QBE LMI, in a joint report with BIS Shrapnel, said that loan approvals for first homebuyers would drop from 190,000 in 2009 to 115,000 in 2010 – a 40% decline attributed to the removal of the First Home Owner Boost.
This was not, however, a historically weak figure, given that the last time a grant boost was withdrawn, in 2001, first homebuyer demand slumped 60%.
Ian Graham, CEO of QBE LMI, rejected a JP Morgan/Fujitsu report that warned of credit rationing in 2010. Graham said increasing competition would not allow such a scenario.
“Anything that involves limiting borrowers’ access to finance will only result in increased demand … which, if not met by one lender or one group of lenders over time, will be satisfied by others in the market,” he said.
Source: Broker News
A new report by Australian Property Monitors shows that rising interest rates and property prices are forcing more potential owner-occupiers into the rental market, causing a renewed surge in rents.
Median rent in capital cities grew 1.5% in the March 2010 quarter. This compared to just 2% growth for the whole of 2009.
“Affordability is once again the major issue restraining potential homebuyers moving from rental accommodation to ownership,” said APM economist Matthew Bell.
The long-term average increase in rents is 6–7% per year for houses and 7–10% for units. “As the economy continues to improve, rents are expected to get back to and exceed those levels,” Bell said.
Darwin saw the biggest leap, with house rents rising 10% in just three months. Melbourne’s 2.8% quarterly increase was its first in 18 months. Rents in Sydney and Canberra remained flat in the March quarter, but are expected to take off soon.
Source: Broker News
Economists are forecasting that a new consumer survey, to be released on Wednesday, will show a slump in confidence in the economic outlook, driven largely by rising interest rates.
Westpac’s consumer sentiment index remained high over the last six months, despite four official interest rate rises.
However, Matthew Hassan, senior economist at Westpac, told AFR that the April rate rise had forced households to take stock. “It is pretty clear that once mortgage rates push above 7%, incremental rate rises have an impact on consumer sentiment,” he said.
The RBA would have to take note of the drop in sentiment, Hassan said, as it would show to the central bank that tightening measures were having an effect.
Macquarie Bank and Commsec economists have warned that the strong economy could cause the cash rate to rise a further 3% by 2012, pushing mortgage rates over 10%.
By Broker News
Complaints from industry and commercial brokers about tougher lending criteria for small businesses have sparked a senate inquiry into access to small business finance.
Small business groups have complained that a lack of access to financing on fair terms has pushed viable businesses to the brink of bankruptcy but the major lenders are expected to defend their position as warranted given the uncertain economic environment.
Westpac told the Australian Financial Review that some views about access to finance are overstated adding that there were no “major changes” to key SME credit policies such as debt service and interest cover and LVR, excluding commercial property.
“In pricing banking services for our SME customers, Westpac Group has taken into account a range of factors including the expected increase in losses and provisioning and pricing for risk as a result of the business cycle, as well as higher capital charges and increases in the cost of wholesale funds,” it said.
