With Australia missing the Global Financial Crisis boat and the economy powering ahead first home buyers and home owners could soon face mortgage home loan rates around the 8%.
This scenario will depend on a number of factors including:
- Mortgage home loan competition. Unless we see a vigorous embracing of securitised mortgage lenders by both mortgage brokers and home buyers and homeowners, the banks with creep up their margins on the official cash rate. Major banks margins are nearly 3%, and that is over 1% on what is was three years ago at the height of a competitive non bank lending industry.
- Legislation. Senator Bob Brown, leader of the Greens Party has introduced a bill that looks to cut mortgage interest rates and fees and charges on all lending other credit products to fair levels. Will the banks will be lobbying hard to stop this as this will white ant their mortgage home loan record profits.
- The RBA decisions over the next twelve months. The Reserve bank of Australia is the body that will steer Australia into a low inflation, low unemployment economic future. Balancing home loan affordability with consumer spending and business demand is a hard task, given that one of Australia's biggest challenges is the housing shortage that is driving home prices, and the size of the average home loan ever higher.
- Government housing policy. Basically we don't have the policies to drive the home building industry to address our current housing shortage. The fundamental problem is that developed land is too expensive and in too short supply and takes too long to be approved by State and Local Governments. A Government policy at State or Federal levels to acquire and develop land for residential land has to be a priority. This will take the heat out of established home prices and make homes more affordable.
- Marketing tactics by developers. Even when land was plentiful, land developers used unfair tactics in my view with the aim to push prices higher by "creating artificial scarcity". This practice needs to be stopped, and more competition in the land development brought about.
By addressing these issues, housing will be less expensive, even if mortgage home loan interest rates go higher.
And by addressing the root cause of house prices going higher, by building more housing stock sooner, one of the main reasons for RBA interest rate rises, home price increases, will be removed, according to Rick Adlam, Mr Mortgage home loans.
