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  • Home Financing Dips as Market Signals Potential Rate Hike | Canberra weather

Home Financing Dips as Market Signals Potential Rate Hike | Canberra weather

By on November 1, 2021 0


news, business, economy, housing, banks, loans, interest rates, RBA

Housing finance fell for the fourth month in a row, with experts signaling that a cut in the central bank’s yield target could lead to further cuts. The latest loan data from the Australian Bureau of Statistics shows that $ 30.3 billion in new home loans were committed in September, down 1.4% from the previous month. The largest drop was felt in homeowner loans, which fell 2.7% from August, making it the category’s eighth consecutive month of decline. On an annual basis, homeowner loans remain 20.8% higher than the same period last year. The most recent lending data comes a day before the anniversary of the Reserve Bank’s latest interest rate cut, which raised the central bank’s main monetary policy lever to 0.1%. A lower cash rate allows Australian banks and lenders to pass on cheaper loans to consumers and businesses, with the aim of boosting economic growth. Falling rates to historic lows pushed both variable and fixed rate mortgages below 2%. Data from RateCity shows that 202 bank and non-bank lenders are still offering rates below the 2% threshold, despite longer-term fixed-rate loans seeing increases in the lending industry. Last Wednesday, the release of the third-quarter consumer price index defied market expectations and revealed that 12-month inflation ending in September rose 3%. The hike is within the upper bounds of the RBA’s ideal inflation target, prompting financial markets to factor in a possible rate hike next year. READ MORE: RBA Governor Philip Lowe has maintained the cash rate will stay at existing levels while inflation is below 2-3%. However, a number of market commentators believe the RBA will need to act sooner to ensure inflation levels remain stable. Economists believe the RBA is likely to drop its short-term bond yield target if inflation continues to boost above the target range. ANZ economist Adelaide Timbrell said a drop in the yield target by the RBA would likely lead to further declines in new home loan activity. “We expect total new home loans to start dropping sharply once interest rates rise,” Ms. Timbrell said in a note. “Fixed mortgage rates are already on the rise and could rise further if the RBA lowers its yield target, as we expect.” Real estate loans reserved for investors increased from the previous month, reaching their highest value since April 2015 at $ 9.6 billion. RateCity’s research director, Sally Tindall, said it’s no surprise that new homeowner loans have plummeted given the heightened affordability issues plaguing the Australian housing market. “With house prices now painfully out of reach for many first-time buyers, especially in Sydney and Melbourne, there is a growing sense of hopelessness for anyone not yet in the market,” he said. she declared. “It’s gotten to a point where, unless first-time homebuyers get a lot of help from their parents, Australia’s big dream of owning a home turns into a nightmare for many people. Victoria saw the biggest declines in new home loans, falling 16.7%, while New South Wales fell 3.1%. The ACT rose 1 percent during the month. RateCity also suggests that rising fixed rates have dampened refinancing activity in the lending industry. According to the ABS, personal financial loans rose 0.4% on the month and business loans jumped 13%, mainly due to the increase in construction financing. Our coverage of the health and safety aspects of this COVID-19 outbreak in ACT and lockdown is free to everyone. However, we depend on subscription revenues to support our journalism. If you can, subscribe here. If you are already a subscriber, thank you for your support. You can also subscribe to our newsletters for regular updates. Our journalists work hard to provide local and up-to-date news to the community. Here’s how you can continue to access our trusted content: