expected, Australia leads the way again,
increasing rates before any one else.
To a great many people a rising rate of interest comes as no surprise and the majority of mortgage holders have been factoring a more normal level of mortgage rates into their upcoming budgets.The proportion of new borrowers who have spread their finances too fine are not likely to represent a great proportion of the market due to the fact that banks have been exceptionally risk averse in their lending criteria, generally requiring at least a 10% deposit and a demonstrated track record of genuine savings without any defaults.Economists seem to be in line with the financial markets with most stating an additional 50 basis points to be added to the cash rate before Christmas this year. First home buyers now represent only 24.7% of all owner occupier housing finance commitments, down from the recent peak of 28.5%. For this reason the mortgage default rate is likely to remain low, which is currently less than 5% of all mortgages that are in arrears. Housing finance commitments for property investors were up by 7.6% in August this year, highlighting the increase in investor numbers in the market as first home buyers wind back after the boost wind down. If financial markets are anything to go by we are likely to see the cash rate lifted in both November and December bringing the official cash rate up to 3.75% and the average variable mortgage rate to around 6.5%. This is also having an effect on the Australian dollar as overseas investors cash in on the higher rate. The increasing of interest rates will have an effect on demand in the first home buyer segment the most as this is by far the most price sensitive segment of the market currently.investors enter the market. First home buyer demand is winding back as the boost to the First Home Buyers Grant has now been reduced to half and the fall back of first home buyer numbers is more than likely to continue. It is expected the overall affect on the housing market from 3 successive increases is not likely to be massive. In all likelihood Australia should see investor numbers continue to increase over the rest of 2009 and into 2010. Additionally, Australia is likely to see the continued trend of more upgraders returning to the market as both these segments are much less price sensitive to rate rises. This is important to have the upgraders buying as it generally means they have a home to sell, creating stock that currently is not there. Locally we have seen sales go through the roof literally. As soon as well priced homes hit the market they are under offer within days, in some cases hours. The rental market has seen a reduction in the numbers of applicants turning up for inspections. Rental values have also stabilised at this point as well.
09/10/2009
