This article is from the Australian Property Journal archive
AUSTRALIANS are taking out fewer home loans. The latest Australian Bureau of Statistics shows the number of loans issued in July fell 0.2% for the six consecutive month.
JPMorgan’s economist Helen Kevans said demand for housing finance has pulled back in the wake of the four interest rate hikes delivered between August 2007 and March 2008 which were topped up by disproportionate increases in domestic banks’ standard variable loan rates.
But Kevans noted that the rise in the number of first home buyers in the market in July was considerable.
First home buyers accounted for 18.6% of all loans in July, jumping a full percent to rise above 18% for the first time since January.
“First home buyers have been suffering amid record low levels of housing affordability but, from July 1, where provided some relief from the Government who started offering a deposit saver scheme to first home buyers,” she added.
The ratio of investors also rose above 31% for the first time since October last year, although investors have dominated around a third of the home loan market for an extended period.
But surprisingly, fixed rate loans as a percentage of all dwellings financed dropped to 8.8% in July in 11.7% in June, the first time this percentage has fallen into single-digit territory since 2005.
Kevans said this is because in July, there was little speculation that the Reserve Bank would soon cut the cash rate.
“It is unusual that there was such a notable exodus away from locking in fixed rate loans,” she continued.
Looking ahead, Kevans said leading housing market indicators, like auction clearance rates, have deteriorated further recently, so any improvement that emerges from here in demand for home loans probably will stem from expectations the RBA will cut the cash rate further.
“We continue to look for a second 25bp rate cut before year-end. The second rate cut probably will be delivered in December.
“An October move remains a risk, but the string of relatively upbeat data expected prior to the October policy meeting – including today’s spike in retail sales (see other email) – coupled with the recent sell-off of the Aussie dollar, may delay an imminent rate cut,”
“That said, we look for the cash rate to fall to 6.25% by mid-2009; hence, the RBA will end what is likely to be a measured, modest easing cycle with its policy stance still leaning to the tight side of neutral,” she concluded.
Australian Property Journal
