This article is from the Australian Property Journal archive
THE spectre of Australia’s Big Four banks raising interest rates independently of the Reserve Bank has spooked home buyer confidence, according to AFG, Australia’s largest mortgage broker.
AFG arranged $2.2 billion of mortgages in October – down 17.5% in volume compared to October 2009 and 4.3% lower than last month, which was already subdued.
According to the company, its worst October mortgage sales result in four years.
New South Wales was the worst affected state, sales fell 13.1% followed by Victoria and Western Australia with falls of 3.9% and 4.3% respectively.
Queensland and South Australia bucked the trend, with rises of 6.4% and 5%, although on relatively low, September figures.
AFG managing director Brett McKeon has called on the Federal Government to act on the current banking system.
“The idea of holding some sort of commission into banking competition and rate setting is farcical. Everyone knows that the best way to keep rates keen is to promote competition.
“But by allowing the 5th and 6th largest banks to be taken over by the Big Four, and by structuring the AOFM to benefit only the Big Four, no one has more effectively sabotaged lender competition in Australia than this Government,” he said.
“If it goes ahead with a commission, to avoid self incrimination the Government will have to restrict the terms of its inquiry so much that its findings will be meaningless.
“Right now we’re suffering from a failure of leadership. All the data suggests that ordinary Australians are worried about rate rises. They are in lock down mode, saving their money, instead of spending it, which would be healthier for the economy,” he continued.
The AFG Mortgage Index showed a continued rise in Fixed Interest mortgages in October as consumers responded to rate worries. These comprise 6.3% of mortgage sales, having climbed steadily since comprising 3.4% in July 2010.
Meanwhile there were proportionately fewer First Home Buyers in October (11.8% of all mortgage sales) compared with September – 12.6% – reversing a trend of the past three months which had seen this sector recover somewhat from its post-First Home Owner Grant low.
McKeon said the politicians in Canberra are responding to this fear with populist claptrap about inquiries and regulation, but the horse has already bolted and unless something is done it will take half a decade to see proper competition return.
“What’s really needed is a circuit-breaker. The fundamentals of our economy are strong, but most Australians are rightly anxious because they sense a lack of leadership, even coherence, in economic policy,” he added.
Australian Property Journal
