Resources: Market Update

In a new report from Access Economics Chris Richardson predicts interest rates will increase by 1% this year, however in order to claim a PR victory the majors may absorb 0.3% of that.

Mr Richardson said many consumers were upset with the way banks had acted over the last few months and believes by undercutting the Reserve bank of Australia it would restore confidence in them.

Looking forward he also believes that the banks may undercut the Reserve Bank by 0.4% into 2011.  Again this would help restore confidence and save customers up to $80 a month on a $300,000 mortgage he said.

Shane Oliver Chief economist of AMP Capital is also of the same opinion saying banks would be raising their rates by less than Reserves official rate increases.   

There may be some interest rate relief after all.



WESTPAC CHANGE LVR

Posted 19/01/2010

Westpac have again led the market this time changing their maximum Loan to Valuation Ratios (LVR).  The LVR is calculated by dividing the total amount of the loan by the appraised value of the property.  What this means is now borrowers must have a bigger deposit.

Before the Change - A Lo Doc Loan
A Borrower purchasing a property for $300000 would need to have 18% deposit or $54000, plus the client would have to cover fees and the Lenders Mortgage Insurance premium (LMI).

They now need to have 20% of the purchase price plus fees and LMI premium that is $60000.

Full Doc Loans Before Change
A Borrower purchasing a property for $300,000 previously needed 8% deposit plus fees and LMI or $24000.

Now to borrow $300,000 a client will need to have a min deposit of 13% of the purchase price or $39000



RESIDENTIAL INVESTORS RETURN TO HOUSING

Posted 18/01/2010

It appears from the latest ABS stats that Investors are slowly coming back to residential property.

With the added pressure and increased media focus around the short supply of housing as well as a reduction of competition from first home buyers and rents increasing, 2010 could provide an upswing.

ABS stats for November show approved finance to investors was $5.3 billion or 6.6% nationally compared with the previous month.

Whilst this is picking up it is well below its peak of $7.1 billion in June 2007.



PROPERTY OUTLOOK IS SOLID FOR 2010

Posted 12/01/2010

In the latest ANZ Property Outlook report released recently it suggests that with the first home owner's boost being removed the residential property market will be tested however the shortage and  improved investor sentiment will push prices higher.

Economist Alex Joiner said  "The remarkable rise in Australian house prices in 2009 has finally silenced the doomsayers. The national median house price has risen by an impressive 10% over the first 10 months of the year buoyed by low interest rates, the first home owner boost (FHOB) and tightening underlying fundamentals,"

"While we still expect a deceleration of prices in 2010 as the FHOB is removed and interest rates are lifted towards 'neutral', recent momentum suggests price gains could be stronger than anticipated."

With underlying demand outstripping supply it appears that we are in for a long period of rising rents and house prices.



ANOTHER RATE INCREASE IN FEB. IS ON THE CARDS

Posted 12/01/2010

Leading economists believe interest rates are likely to rise again when the Reserve meets on February 2.

With all the positive data coming out the RBA most likely will continue moving the cash rate up in 0.25 per cent increments.

AMP's Chief economist Shane Oliver said, "I was thinking the RBA would wait till March before moving again, but with the run of strong economic data lately a February move is looking increasingly likely,"

"Key indicators to watch in deciding to whether the RBA will go again next month are the December employment report to be released in the week ahead and December quarter inflation figures due later this month."

"I think we will see the cash rate rising to 4.5 per cent by mid-year and 4.75 per cent by year end," he said.

One thing for certain is it is just a matter of time before we see further rate increases.



RATE PRESSURE EASES

Posted 07/01/2010

Expectations for higher interest rates are continuing to ease especially in light of the move by the major banks in December.

Commonwealth Bank of Australia (CBA) chief executive Ralph Norris told Sky Business recently "I think given the fact that there have been interest rate increases over and above the (official cash rate) then I think it is a possibility that we might not see an increase in February,"

With all the majors lifting their rates controversially well above the Reserve Bank of Australia (RBA) 25 basis point rate rise, some economists believe this will avert the fourth rise in a row.

Whilst the RBA's official cash rate is 3.75% the market is anticipating the rate to be 4.5% per cent by the middle of this year and 5% by the end.

Not much joy for those trying to break into a strong property market.