The number of new homes sold around Australia has risen for the third month in a row, with February's increase underpinned by a rebound in the hard-hit NSW market.
Sales in NSW increased 16.9 per cent from a month earlier.
However, financial markets are speculating that the Reserve Bank could use the improved sales figures to raise rates again as early as next week, when it holds its next monthly meeting.
Other surveys released yesterday point to more rough patches for owners and renters.
A Fujitsu-JP Morgan Australian Mortgage Industry survey found almost a quarter of home owners had to trim spending to meet mortgage repayments after three interest rate rises last year.
And one of Australia's biggest rental agencies, RUN, also released anecdotal figures showing the pace of rental increases had doubled for Sydney and Melbourne in the past four months, compared with the previous four months.
RUN, which manages 20,000 rental properties, said rents on relet properties in the two cities rose 4 per cent or $53.50 for the four months to October, but this had accelerated to 8.62 per cent, or $109.27 higher, for the four months to February.
While bad news for renters, it is a sign of some health returning to the overall housing market, where low rent returns and falling prices had kept investors away.
Commentators yesterday said the outlook for the housing sector, particularly for first-home buyers and investors, would be dictated by interest rates.
JP Morgan chief economist Stephen Walters said that if rates did rise, it would worsen the market in depressed areas such as western Sydney and outer Melbourne, where three to four out of 10 house sales were forced.
"We are not forecasting a rates rise this year, but eight or nine other economists are going for a rate rise," he said.
Fujitsu/JP Morgan found that of the 1500 people surveyed who were thinking about buying a property for the first time, 30 per cent said they could not afford it. The figure is up from 17 per cent at the same time last year.
In contrast, rising interest rates would have little impact on upper to middle housing markets around the country. "If rates do rise, it is likely to be next month, otherwise we are into the May budget and an election later this year," Mr Walters said.
Housing Industry Association executive director Simon Tennent said that with housing affordability still low, further interest rate rises might stymie the recovery in new-home sales.
Sales of private detached houses rose 3.9 per cent in February, while sales of units fell 4.2 per cent, the association said.
Western Australia had the second-fastest rise in new-home sales, with an increase of 11.2 per cent, while sales in Queensland fell 3.4 per cent in February.
The overall sales volume last month was still 5.2 per cent lower than a year ago.
Source: The Australian
Saturday, March 31, 2007
Housing demand in the UK is starting to soften.
A lack of supply of homes for sale and new housing stock development will continue to support prices, Nationwide says recent rises in UK mortgage interest rates are beginning to have an impact on homebuyers, the Nationwide has said. But the building society's housing survey still showed prices up by 0.7% in February, lifting annual price growth to 10.2% from 9.3% in January.
Nationwide said interest among buyers and demand for mortgages was beginning to wane following the rate increases.
Even so, it said price inflation would remain firm for a while, because of a lack of supply of properties for sale.
Nationwide said the average price of a UK property now stood at £174,706.
"Not all indicators are cooling just yet," said the Nationwide's chief economist, Fionnuala Earley.
"For now, supply issues are keeping an upward pressure on prices as property sales have continued to rise, while the number of properties placed on the market has been falling," she added.
Cooling off?
The building society points to a recent dip in new mortgage approvals, and enquiries from would-be buyers at estate agents, as evidence that the market may be about to cool off in the wake of the Bank of England's three recent increases in interest rates.
On Tuesday, the British Bankers' Association reported that its members, who account for about half of current mortgage lending, had seen a small fall in new mortgages approved for home buyers in January, compared with the same month last year.
However, the Nationwide points out that the buy-to-let market is also keeping the wider property market buoyant.
Ms Earley admitted it might be some time before the annual rate of house price inflation started to subside.
"The annual rate of house price growth will remain close to 10% until late spring. By the second half of 2007, we continue to expect to see a more pronounced slowdown," she said.
Nationwide said interest among buyers and demand for mortgages was beginning to wane following the rate increases.
Even so, it said price inflation would remain firm for a while, because of a lack of supply of properties for sale.
Nationwide said the average price of a UK property now stood at £174,706.
"Not all indicators are cooling just yet," said the Nationwide's chief economist, Fionnuala Earley.
"For now, supply issues are keeping an upward pressure on prices as property sales have continued to rise, while the number of properties placed on the market has been falling," she added.
Cooling off?
The building society points to a recent dip in new mortgage approvals, and enquiries from would-be buyers at estate agents, as evidence that the market may be about to cool off in the wake of the Bank of England's three recent increases in interest rates.
On Tuesday, the British Bankers' Association reported that its members, who account for about half of current mortgage lending, had seen a small fall in new mortgages approved for home buyers in January, compared with the same month last year.
However, the Nationwide points out that the buy-to-let market is also keeping the wider property market buoyant.
Ms Earley admitted it might be some time before the annual rate of house price inflation started to subside.
"The annual rate of house price growth will remain close to 10% until late spring. By the second half of 2007, we continue to expect to see a more pronounced slowdown," she said.
Thursday, March 29, 2007
New shared equity mortgage loans may flood the property market with home buyers and force prices up
Equity finance mortgages, just released from the Adelaide Bank could make property ownership easier, but analysts warn it could boost house prices because it fuels demand without addressing supply.
The announcement came just a day after economic analysis released by the Federal Labor Party claimed housing affordability across the nation was in crisis.
The loan product allows home owners to borrow as little as 75 per cent of the value of their home, after putting up a 5 per cent deposit.
The other 20 per cent will be covered by what is called an equity finance mortgage or EFM.
The borrower pays no interest or principal repayments on this 25-year mortgage, but when they sell the house, the bank gets 40 per cent of the total capital gains. On the upside, if the house declines in value, the bank absorbs up to a maximum of 20 per cent of the losses.
The loan effectively allows people to buy a house up to 25 per cent more expensive than is possible under a traditional home loan.
Adelaide Bank chief general manager, banking, Stephen Small said the bank, and its partner Rismark International had been developing the product for about four years.
"The EFM is an ideal home loan for a first-time buyer lacking the full finances required for entry into the home-owner market," Mr Small said.
"If and only if the property increases in value will the lender be entitled to a share of the capital gains."
If the house loses value, and the bank absorbs 20 per cent of the capital loss, it was effectively a negative interest rate, Mr Small said.
He said the new loan would allow people to buy homes up to 25 per cent more expensive and cut 20 per cent off the cost of their mortgages.
CommSec senior financial analyst Carlos Castillo said that if such loans became widespread, the effect would likely be an increase in house prices.
"If it does become more widespread it does mean there is more demand for properties and people can afford to pay more than in the past," Mr Castillo said.
"I don't think it's outside of the realms of possibility that rather than increasing affordability and keeping house prices where they are, that house prices might just ratchet up by the amount of the benefit that comes from this type of product."
Mr Castillo said this would only happen if other banks took up the product and it became widespread.
"History suggests that if this product does find a market out there then it wouldn't take too long for other players to . . . replicate the product."
Rismark managing director Christopher Joye said the key target market were people who were priced out of the home ownership market, those who already had a mortgage but wanted to free up income, or those who wanted to buy a larger home.
Real Estate Institute of Australia president Mark Sanderson said anything which helped people get out of the renting cycle and into home ownership was welcome.
Australian Consumers' Association spokesperson Nick Coates said consumers needed to make sure they knew what they were signing up for.
"As shared appreciation mortgages become more widely available the things that consumers need to watch on them are how much interest they pay on them," he said.
"By that I mean what it is at the end when you work out how much the house has appreciated.
"The critical thing there is you are satisfied with the valuation and you believe the valuation reflects the value of your house."
Herald Sun
The announcement came just a day after economic analysis released by the Federal Labor Party claimed housing affordability across the nation was in crisis.
The loan product allows home owners to borrow as little as 75 per cent of the value of their home, after putting up a 5 per cent deposit.
The other 20 per cent will be covered by what is called an equity finance mortgage or EFM.
The borrower pays no interest or principal repayments on this 25-year mortgage, but when they sell the house, the bank gets 40 per cent of the total capital gains. On the upside, if the house declines in value, the bank absorbs up to a maximum of 20 per cent of the losses.
The loan effectively allows people to buy a house up to 25 per cent more expensive than is possible under a traditional home loan.
Adelaide Bank chief general manager, banking, Stephen Small said the bank, and its partner Rismark International had been developing the product for about four years.
"The EFM is an ideal home loan for a first-time buyer lacking the full finances required for entry into the home-owner market," Mr Small said.
"If and only if the property increases in value will the lender be entitled to a share of the capital gains."
If the house loses value, and the bank absorbs 20 per cent of the capital loss, it was effectively a negative interest rate, Mr Small said.
He said the new loan would allow people to buy homes up to 25 per cent more expensive and cut 20 per cent off the cost of their mortgages.
CommSec senior financial analyst Carlos Castillo said that if such loans became widespread, the effect would likely be an increase in house prices.
"If it does become more widespread it does mean there is more demand for properties and people can afford to pay more than in the past," Mr Castillo said.
"I don't think it's outside of the realms of possibility that rather than increasing affordability and keeping house prices where they are, that house prices might just ratchet up by the amount of the benefit that comes from this type of product."
Mr Castillo said this would only happen if other banks took up the product and it became widespread.
"History suggests that if this product does find a market out there then it wouldn't take too long for other players to . . . replicate the product."
Rismark managing director Christopher Joye said the key target market were people who were priced out of the home ownership market, those who already had a mortgage but wanted to free up income, or those who wanted to buy a larger home.
Real Estate Institute of Australia president Mark Sanderson said anything which helped people get out of the renting cycle and into home ownership was welcome.
Australian Consumers' Association spokesperson Nick Coates said consumers needed to make sure they knew what they were signing up for.
"As shared appreciation mortgages become more widely available the things that consumers need to watch on them are how much interest they pay on them," he said.
"By that I mean what it is at the end when you work out how much the house has appreciated.
"The critical thing there is you are satisfied with the valuation and you believe the valuation reflects the value of your house."
Herald Sun
Bad debt is on the rise with debt strapped homeowners in the mortgage belt.
A growing number of households are falling behind in the mortgage payments as record indebtedness, rising interest rates and high petrol prices continue to bite.
Moody's Investors Services has found that 30-day delinquency levels in the fourth quarter of 2006 were on the rise, particularly in December, when seasonal factors such as Christmas spending depleted borrowers' pockets.
Moody's said the availability of "easy money" and a relaxation of lending rules had led to many households incurring high levels of debt that were out of line with their ability to repay.
Moody's analyst and author of the report, Philip Wong, said that as a result of high debt levels, borrowers were much more sensitive to adverse movements in the cost of living and debt repayments.
"While interest rates appear to be on hold in the near term, the full impact of the most recent rate rises of 0.25 per cent in November, 2006 has not yet been reflected in borrower behaviour," Mr Wong said.
He said the housing loan market remains fiercely competitive between banks and non-bank lenders who are introducing new products such as no-deposit finance to drive volume and market share.
"The current trend of increasing issuer risk appetite and relaxation of lending rules may increase future delinquency and loss rates, especially during economic stress," Mr Wong said in the report.
The report said that rapid growth of house values, where borrowers benefited from significant equity build-up in their properties, had come to an end.
It said that while there were spectacular rises in Western Australia, property prices on the eastern seaboard were flat.
"Furthermore, disparities can be observed within cities themselves, with increased levels of mortgagee repossession in troubled areas like southwestern Sydney but continued property appreciation in premium areas such as Sydney's north shore and eastern suburbs," the report said.
The chief executive of the Australian Banker's Association, David Bell, said the percentage of delinquent home loans for banks was at very low levels, particularly when compared with non-bank mortgage lending.
"The Moody's data shows that the delinquency performance of non-bank lenders' loans is much higher than for banks," Mr Bell said.
According to Moody's, non-conforming lenders' delinquency rate is 2.15 per cent for loans 30 days past due, while the banks' rate is 0.78 per cent.
"There is a large and growing segment of non-conforming lenders in the mortgage marketplace," Mr Bell said.
"They are not prudentially supervised and often need to act more quickly on a mortgage default than a bank."
He said if a customer could make payments on their loan they should speak to their bank as soon as possible.
"Generally, the bank will try to work out a solution, for example a different repayment schedule to accommodate temporary difficulties," Mr Bell said.
Source: AAP
Moody's Investors Services has found that 30-day delinquency levels in the fourth quarter of 2006 were on the rise, particularly in December, when seasonal factors such as Christmas spending depleted borrowers' pockets.
Moody's said the availability of "easy money" and a relaxation of lending rules had led to many households incurring high levels of debt that were out of line with their ability to repay.
Moody's analyst and author of the report, Philip Wong, said that as a result of high debt levels, borrowers were much more sensitive to adverse movements in the cost of living and debt repayments.
"While interest rates appear to be on hold in the near term, the full impact of the most recent rate rises of 0.25 per cent in November, 2006 has not yet been reflected in borrower behaviour," Mr Wong said.
He said the housing loan market remains fiercely competitive between banks and non-bank lenders who are introducing new products such as no-deposit finance to drive volume and market share.
"The current trend of increasing issuer risk appetite and relaxation of lending rules may increase future delinquency and loss rates, especially during economic stress," Mr Wong said in the report.
The report said that rapid growth of house values, where borrowers benefited from significant equity build-up in their properties, had come to an end.
It said that while there were spectacular rises in Western Australia, property prices on the eastern seaboard were flat.
"Furthermore, disparities can be observed within cities themselves, with increased levels of mortgagee repossession in troubled areas like southwestern Sydney but continued property appreciation in premium areas such as Sydney's north shore and eastern suburbs," the report said.
The chief executive of the Australian Banker's Association, David Bell, said the percentage of delinquent home loans for banks was at very low levels, particularly when compared with non-bank mortgage lending.
"The Moody's data shows that the delinquency performance of non-bank lenders' loans is much higher than for banks," Mr Bell said.
According to Moody's, non-conforming lenders' delinquency rate is 2.15 per cent for loans 30 days past due, while the banks' rate is 0.78 per cent.
"There is a large and growing segment of non-conforming lenders in the mortgage marketplace," Mr Bell said.
"They are not prudentially supervised and often need to act more quickly on a mortgage default than a bank."
He said if a customer could make payments on their loan they should speak to their bank as soon as possible.
"Generally, the bank will try to work out a solution, for example a different repayment schedule to accommodate temporary difficulties," Mr Bell said.
Source: AAP
Commonwealth Bank of Australia get credit card swipe slur from Consumer watchdog
The New South Wales government-backed Consumer Credit Legal Centre has described the Commonwealth Bank as the worst offender in terms of irresponsible credit card lending, based on the cases it sees.
"Commonwealth Bank is over-represented on our case work for irresponsible lending relating to credit cards," the centre's principal solicitor Katherine Lane said.
"In other words we do more matters involving the Commonwealth Bank on irresponsible lending than any other bank." She said that of the cases the centre came across relating to irresponsible credit card lending, most involved unsolicited limit increases by CBA.
Ms Lane pointed to one recent case involving the bank, where a person who was on social security received a credit card limit increase to $27,000.
She also said that the centre's advice line was over-represented by CBA, with people calling in due to financial hardship or irresponsible lending claims.
"Commonwealth Bank is one of the banks that we see most of the financial hardship stuff ... and limit increases that could be argued to be irresponsible," she said.
A CBA spokesman said: "We take responsible lending very seriously and have policies in place to assist our customers to understand the circumstances when these offers are made. Our policies preclude lending to customers on a fixed income and our approval process takes into account customers' past repayment history and ability to repay.
"What that means is that no one will get an offer if they have defaulted in the past or missed a repayment ... they just won't get an offer.
"The people that get the offers have all had sound repayment histories and they have kept within the terms of their credit card."
The latest Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Federal Treasurer Peter Costello met the head of the major banks last year and warned them against lowering their credit standards.
Ms Lane called on CBA to introduce a new code of conduct, similar to that of its rival, ANZ.
The CBA spokesman said that the bank had a hardship service area and that the bank met "everything that ANZ does -- the only thing that we've not done is put it in writing".The Australian.
Source: AAP
"Commonwealth Bank is over-represented on our case work for irresponsible lending relating to credit cards," the centre's principal solicitor Katherine Lane said.
"In other words we do more matters involving the Commonwealth Bank on irresponsible lending than any other bank." She said that of the cases the centre came across relating to irresponsible credit card lending, most involved unsolicited limit increases by CBA.
Ms Lane pointed to one recent case involving the bank, where a person who was on social security received a credit card limit increase to $27,000.
She also said that the centre's advice line was over-represented by CBA, with people calling in due to financial hardship or irresponsible lending claims.
"Commonwealth Bank is one of the banks that we see most of the financial hardship stuff ... and limit increases that could be argued to be irresponsible," she said.
A CBA spokesman said: "We take responsible lending very seriously and have policies in place to assist our customers to understand the circumstances when these offers are made. Our policies preclude lending to customers on a fixed income and our approval process takes into account customers' past repayment history and ability to repay.
"What that means is that no one will get an offer if they have defaulted in the past or missed a repayment ... they just won't get an offer.
"The people that get the offers have all had sound repayment histories and they have kept within the terms of their credit card."
The latest Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Federal Treasurer Peter Costello met the head of the major banks last year and warned them against lowering their credit standards.
Ms Lane called on CBA to introduce a new code of conduct, similar to that of its rival, ANZ.
The CBA spokesman said that the bank had a hardship service area and that the bank met "everything that ANZ does -- the only thing that we've not done is put it in writing".The Australian.
Source: AAP
New Housing starts fall and push up house costs
The number of new dwellings built in Australia fell at the end of last year, which would work to keep housing unaffordable, analysts say.
Dwelling commencements in the December quarter fell 0.8 per cent to 37,413 units, seasonally adjusted, from a downwardly revised 37,726 units in the September quarter, the Australian Bureau of Statistics said today. The median market estimate was for a fall of 3 per cent in the December quarter.
In the year to December 2006, total dwelling commencements rose 5.5 per cent, seasonally adjusted.
Housing Industry Association executive director of housing and economics Simon Tennent said the decline in dwelling commencements was not surprising.
"The industry is continuing to face all sorts of pressures from high land costs and a lack of interest from the market in general," he said.
"Approvals are taking longer and longer to get to commencement stage."
The housing industry would not recover until late in 2007 or early next year, Mr Tennent said.
He said the industry needed to build 40,000 homes in the quarter to cater for population growth.
"It continues to show the industry is building less," Mr Tennent said.
"The pressure on housing affordability and the rental market is not going to go away until we build 40,000 homes per quarter."
UBS chief economist Scott Haslem said the numbers suggested a recovery in the housing sector was still some way off.
"It's out there we just don't know when," Mr Haslem said.
"The figures are consistent with the weak building approvals we've seen. They paint a picture of a housing sector that's stuck in the mire."
Source: AAP
Dwelling commencements in the December quarter fell 0.8 per cent to 37,413 units, seasonally adjusted, from a downwardly revised 37,726 units in the September quarter, the Australian Bureau of Statistics said today. The median market estimate was for a fall of 3 per cent in the December quarter.
In the year to December 2006, total dwelling commencements rose 5.5 per cent, seasonally adjusted.
Housing Industry Association executive director of housing and economics Simon Tennent said the decline in dwelling commencements was not surprising.
"The industry is continuing to face all sorts of pressures from high land costs and a lack of interest from the market in general," he said.
"Approvals are taking longer and longer to get to commencement stage."
The housing industry would not recover until late in 2007 or early next year, Mr Tennent said.
He said the industry needed to build 40,000 homes in the quarter to cater for population growth.
"It continues to show the industry is building less," Mr Tennent said.
"The pressure on housing affordability and the rental market is not going to go away until we build 40,000 homes per quarter."
UBS chief economist Scott Haslem said the numbers suggested a recovery in the housing sector was still some way off.
"It's out there we just don't know when," Mr Haslem said.
"The figures are consistent with the weak building approvals we've seen. They paint a picture of a housing sector that's stuck in the mire."
Source: AAP
Wednesday, March 28, 2007
Aussies slam credit card surcharges
Australian credit card holders are not happy about surcharges on credit card payments, with a NEWS.com.au survey showing many people are ditching plastic for cash payments to avoid such fees.
The survey of credit card holders has revealed 46 per cent had used another means of payment when asked to pay a surcharge.
When respondents were asked about alternative payments, the most commonly cited were BPay, cash and EFTPOS.
The survey of of 1678 people was carried out between February 12 and 20 in conjunction with online polling firm Coredata.
Being stung by higher interest rates? Have your say in our online property survey.
The survey comes in response to an increasing number of merchants using surcharges on credit card payments to recoup costs they incur in credit-card transactions.
In recent years, the RBA has removed restrictions on merchants applying surcharges to credit-card payments.
While some consmers still used credit cards when faced with a surcharge - many citing convenience as a reason - other people said they went to different merchants.
"I pulled up in a petrol station and there was a sign saying they charged a surcharge for credit cards, I then drove to the next station down the road that did not," said one respondent.
Consumers aren't happy about other fees associated with credit cards and a whopping 61 per cent of respondents had been stung by fees for either paying off their credit card too late or not paying the required amount.
Of those who had been hit with late fees, 56 per cent said they were a "rip off", another 23 per cent said they were not fair and 22 per cent said they wanted to close their account.
But some respondents admitted self-fault, with 31 per cent of late payers said they were "annoyed with themselves".
Not all consumers are fully informed about their plastic. Many respondents, or about 30 per cent, were not sure of the interest rate on their credit cards.
Fewer respondents (13 per cent) admitted to being unsure of the fees on their card.
But most people (87 per cent) knew how many interest-free days they had on their credit cards.
Of those surveyed, 90 per cent had a credit card and 62 per cent of credit-card holders made full payment on their cards each month.
Recent Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Source: NEWS.com.au
The survey of credit card holders has revealed 46 per cent had used another means of payment when asked to pay a surcharge.
When respondents were asked about alternative payments, the most commonly cited were BPay, cash and EFTPOS.
The survey of of 1678 people was carried out between February 12 and 20 in conjunction with online polling firm Coredata.
Being stung by higher interest rates? Have your say in our online property survey.
The survey comes in response to an increasing number of merchants using surcharges on credit card payments to recoup costs they incur in credit-card transactions.
In recent years, the RBA has removed restrictions on merchants applying surcharges to credit-card payments.
While some consmers still used credit cards when faced with a surcharge - many citing convenience as a reason - other people said they went to different merchants.
"I pulled up in a petrol station and there was a sign saying they charged a surcharge for credit cards, I then drove to the next station down the road that did not," said one respondent.
Consumers aren't happy about other fees associated with credit cards and a whopping 61 per cent of respondents had been stung by fees for either paying off their credit card too late or not paying the required amount.
Of those who had been hit with late fees, 56 per cent said they were a "rip off", another 23 per cent said they were not fair and 22 per cent said they wanted to close their account.
But some respondents admitted self-fault, with 31 per cent of late payers said they were "annoyed with themselves".
Not all consumers are fully informed about their plastic. Many respondents, or about 30 per cent, were not sure of the interest rate on their credit cards.
Fewer respondents (13 per cent) admitted to being unsure of the fees on their card.
But most people (87 per cent) knew how many interest-free days they had on their credit cards.
Of those surveyed, 90 per cent had a credit card and 62 per cent of credit-card holders made full payment on their cards each month.
Recent Reserve Bank of Australia statistics show that the nation's personal credit card debt is $35.6 billion.
Source: NEWS.com.au
Mortgage interest rates are forecast to keep rising
How things change in the mortgage rate speculation!
A key analyst is now predicting interest rates will rise in the first week of April and again within 12 months, which would hit hard Australians on lower incomes.
“On balance it now looks likely that the Bank will raise rates by 0.25 basis points following its April 3 Board meeting,” said Westpac Bank’s chief economist Bill Evans today in a research note. Any decision would be announced to the public on April 4.
The central bank raised interest rates three times last year, with November’s rate rise of 25 basis points taking official interest rates to a 6-year high.
Being stung by higher interest rates? Have your say in our survey.
According to Mr Evans, the pain to households will continue into next year and rates would rise even more.
“A rise in interest rates in April or May would not mark the peak of the cycle. We expect that the Bank would be prepared to go on hold for the remainder of 2007 to assess the cumulative impact of four rate hikes over a full year.
“However, we expect that the factors pushing up inflation over the last year would remain apparent through the second half of 2007 leading to a further move by early 2008.”
Recent economic data suggests wages growth remains robust and economic growth remains “relatively growth”.
The RBA sets interest rates to keep inflation between 2 and 3 per cent and strong economic growth pressures inflation higher.
The Aussie dollar has surged over US80 cents and bond yields have gone up in expectation of another rate rise. The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
People on lower incomes and Australians up to their ears in debt would be hurt particularly by another rate rise.
Bank repossessions of properties are rising around Australia, especially in lower income areas such as Sydney's and Melbourne's outer suburbs.
Property investors who also bought at the peak of the boom of 2003 have also been stung by higher interest rates and some home owners are now in a position where their mortgage is worth more than their home, or they hold "negative equity".
Source: NEWS.com.au
A key analyst is now predicting interest rates will rise in the first week of April and again within 12 months, which would hit hard Australians on lower incomes.
“On balance it now looks likely that the Bank will raise rates by 0.25 basis points following its April 3 Board meeting,” said Westpac Bank’s chief economist Bill Evans today in a research note. Any decision would be announced to the public on April 4.
The central bank raised interest rates three times last year, with November’s rate rise of 25 basis points taking official interest rates to a 6-year high.
Being stung by higher interest rates? Have your say in our survey.
According to Mr Evans, the pain to households will continue into next year and rates would rise even more.
“A rise in interest rates in April or May would not mark the peak of the cycle. We expect that the Bank would be prepared to go on hold for the remainder of 2007 to assess the cumulative impact of four rate hikes over a full year.
“However, we expect that the factors pushing up inflation over the last year would remain apparent through the second half of 2007 leading to a further move by early 2008.”
Recent economic data suggests wages growth remains robust and economic growth remains “relatively growth”.
The RBA sets interest rates to keep inflation between 2 and 3 per cent and strong economic growth pressures inflation higher.
The Aussie dollar has surged over US80 cents and bond yields have gone up in expectation of another rate rise. The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
People on lower incomes and Australians up to their ears in debt would be hurt particularly by another rate rise.
Bank repossessions of properties are rising around Australia, especially in lower income areas such as Sydney's and Melbourne's outer suburbs.
Property investors who also bought at the peak of the boom of 2003 have also been stung by higher interest rates and some home owners are now in a position where their mortgage is worth more than their home, or they hold "negative equity".
Source: NEWS.com.au
Financial services and mortgage wholesaler group Challenger reports a record profit
The finance company backed by billionaire James Packer has delivered a record result by more than doubling its first-half profit.
Challenger Financial Services Group yesterday reported a 117 per cent surge in interim net profit to $130 million, up from $60 million in the previous corresponding period.
That put the company in a position to easily eclipse its $134.3 million net profit result for the year to June.
Assets under management swelled 17 per cent to $46.4 billion over the six months to December, with net income growing 47 per cent to $324 million.
"The result was driven by strong revenue growth across each of our businesses," chief executive Mike Tilley said.
Three of the company's four divisions had met or bettered their return on net assets target of 18 per cent for the half, he said. Only the financial planning division failed to meet the benchmark.
"We are delivering a greater than 30 per cent return on net tangible assets from our businesses and achieving double- digit growth in earnings per share (EPS)," Mr Tilley said.
The firm has interests in funds management, property and infrastructure assets, mortgage financing and financial planning. Mr Packer is the biggest single shareholder with a 22 per cent holding.
Challenger plans to increase investments after starting two Australian property funds and forming real estate joint ventures in Japan and London.
Challenger declared a fully franked interim dividend of 5¢, double the amount from a year earlier.
Source: The Australian
Challenger Financial Services Group yesterday reported a 117 per cent surge in interim net profit to $130 million, up from $60 million in the previous corresponding period.
That put the company in a position to easily eclipse its $134.3 million net profit result for the year to June.
Assets under management swelled 17 per cent to $46.4 billion over the six months to December, with net income growing 47 per cent to $324 million.
"The result was driven by strong revenue growth across each of our businesses," chief executive Mike Tilley said.
Three of the company's four divisions had met or bettered their return on net assets target of 18 per cent for the half, he said. Only the financial planning division failed to meet the benchmark.
"We are delivering a greater than 30 per cent return on net tangible assets from our businesses and achieving double- digit growth in earnings per share (EPS)," Mr Tilley said.
The firm has interests in funds management, property and infrastructure assets, mortgage financing and financial planning. Mr Packer is the biggest single shareholder with a 22 per cent holding.
Challenger plans to increase investments after starting two Australian property funds and forming real estate joint ventures in Japan and London.
Challenger declared a fully franked interim dividend of 5¢, double the amount from a year earlier.
Source: The Australian
Finance Markets expect mortgage interest rates to rise on wage increase pressures.
The Reserve Bank of Australia's suspicion that wage pressure is accelerating is being confirmed by economic data, placing more pressure on interest rates.
The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
Early assessments by private sector economists suggest that March quarter inflation will push the annual rate higher, rather than lower as expected.
The RBA set interest rates to keep inflation between 2 and 3 per cent.
The Australian Industry Group's March quarter manufacturing survey, out next month, shows rising cost pressures on business.
AIG chief economist Tony Pensabene said yesterday that companies were also pushing up selling prices, although profit margins were still being eroded.
"Skill shortages and shortages of labour generally are putting pressure on companies to deliver wages either to reward or retain staff. There are also clear signs that the drought is having an impact on supply chains, and that has put some pressure on particular food sectors.
The AIG survey is consistent with the findings of the National Australia Bank and the ACCI business surveys.
The monthly NAB survey shows that both wages levels and spare capacity are at levels to raise concern at the Reserve Bank.
It shows the average wage rise increased from 4.5 to 4.75 per cent in the second half of last year, and moved to 5.25 per cent in both January and February.
NAB chief economist Jeff Oughton warns that the survey figures are typically about a percentage point higher than the official national wage price index, but they underscore the rising wage pressure.
Both the NAB and the AIG surveys show companies are running out of spare production capacity. These surveys are the only direct measure of how closely the economy is approaching the limits of its capacity and are closely followed by the Reserve Bank. The NAB survey shows business is operating at a record 83.9 per cent of its capacity.
The latest ACCI-St George survey shows that in the December quarter wage and other cost pressures were at their highest level since the survey began in 1994.
However, the business surveys show that cost pressures are not fully reflected in sales prices. The NAB survey shows retail prices are only rising at an annual rate of 1.9 per cent. Both AIG and ACCI surveys show a moderate lift in selling prices.
Westpac inflation expert Anthony Thompson said the headline rate of inflation for the quarter was likely to be 0.8 or 0.9 per cent, compared with the December quarter's 0.1 per cent fall in consumer prices.
"Petrol prices have ratcheted higher, whereas early in the quarter it had looked as though they might fall by an average of 4.5 per cent."
He said a very preliminary estimate suggested the core inflation rate for the quarter might rise from the December quarter's 0.5 to 0.7 per cent.
"Domestic demand, particularly from consumers, is proving extremely resilient to last year's rate hikes."
The monthly inflation index compiled by the Melbourne Institute and TD Securities shows that, excluding volatile items and housing rent, price pressure in February was the most intense in the past four years.
Source: The Australian
The Australian bank bill futures market yesterday put the chance of a rate rise at the next Reserve Bank board meeting at 50 per cent, while a rate hike in the next 12 months is considered a certainty.
Early assessments by private sector economists suggest that March quarter inflation will push the annual rate higher, rather than lower as expected.
The RBA set interest rates to keep inflation between 2 and 3 per cent.
The Australian Industry Group's March quarter manufacturing survey, out next month, shows rising cost pressures on business.
AIG chief economist Tony Pensabene said yesterday that companies were also pushing up selling prices, although profit margins were still being eroded.
"Skill shortages and shortages of labour generally are putting pressure on companies to deliver wages either to reward or retain staff. There are also clear signs that the drought is having an impact on supply chains, and that has put some pressure on particular food sectors.
The AIG survey is consistent with the findings of the National Australia Bank and the ACCI business surveys.
The monthly NAB survey shows that both wages levels and spare capacity are at levels to raise concern at the Reserve Bank.
It shows the average wage rise increased from 4.5 to 4.75 per cent in the second half of last year, and moved to 5.25 per cent in both January and February.
NAB chief economist Jeff Oughton warns that the survey figures are typically about a percentage point higher than the official national wage price index, but they underscore the rising wage pressure.
Both the NAB and the AIG surveys show companies are running out of spare production capacity. These surveys are the only direct measure of how closely the economy is approaching the limits of its capacity and are closely followed by the Reserve Bank. The NAB survey shows business is operating at a record 83.9 per cent of its capacity.
The latest ACCI-St George survey shows that in the December quarter wage and other cost pressures were at their highest level since the survey began in 1994.
However, the business surveys show that cost pressures are not fully reflected in sales prices. The NAB survey shows retail prices are only rising at an annual rate of 1.9 per cent. Both AIG and ACCI surveys show a moderate lift in selling prices.
Westpac inflation expert Anthony Thompson said the headline rate of inflation for the quarter was likely to be 0.8 or 0.9 per cent, compared with the December quarter's 0.1 per cent fall in consumer prices.
"Petrol prices have ratcheted higher, whereas early in the quarter it had looked as though they might fall by an average of 4.5 per cent."
He said a very preliminary estimate suggested the core inflation rate for the quarter might rise from the December quarter's 0.5 to 0.7 per cent.
"Domestic demand, particularly from consumers, is proving extremely resilient to last year's rate hikes."
The monthly inflation index compiled by the Melbourne Institute and TD Securities shows that, excluding volatile items and housing rent, price pressure in February was the most intense in the past four years.
Source: The Australian
Tuesday, March 06, 2007
Mortgage interest rates unlikely to rise
Australian home loan mortgage rates are believed to remain untouched when the Reserve Bank of Australia's board meets this morning.
The Reserve Bank of Australia (RBA) increased interest rates three times last year in a bid to rein in inflation.
The official cash rate currently stands at 6.25 per cent.
The central bank has already met once this year and decided to keep interest rates on hold.
TD Securities chief strategist Stephen Koukoulas says while inflation is still higher than the Reserve Bank would like, it is unlikely to raise rates.
"The RBA is waiting to see if the rate hikes of 2006 cool the economy down," Mr Koukoulas said.
"It's too early to be sure that that's the case but they can afford to wait another month."
He says the conflicting news of too high inflation and low economic activity almost guarantees a decision to hold rates.
The RBA will announce its decision tomorrow morning should a change in interest rates occur. If interest rates remain the same then there is usually no announcement.
Source: ABC
The Reserve Bank of Australia (RBA) increased interest rates three times last year in a bid to rein in inflation.
The official cash rate currently stands at 6.25 per cent.
The central bank has already met once this year and decided to keep interest rates on hold.
TD Securities chief strategist Stephen Koukoulas says while inflation is still higher than the Reserve Bank would like, it is unlikely to raise rates.
"The RBA is waiting to see if the rate hikes of 2006 cool the economy down," Mr Koukoulas said.
"It's too early to be sure that that's the case but they can afford to wait another month."
He says the conflicting news of too high inflation and low economic activity almost guarantees a decision to hold rates.
The RBA will announce its decision tomorrow morning should a change in interest rates occur. If interest rates remain the same then there is usually no announcement.
Source: ABC
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