Welcome to this month’s edition of the Dot. We hope you’ve had an enjoyable couple of weeks since we last communicated. The month of September has been an interesting and super productive one. Changes have taken place and now the biggest question on everyone’s lips at the moment…The banks have increased their rates. are there more to follow? This in addition to the below will be discussed in the September blog –
•The cost of Funding
•RBA on hold until 2021 – Westpac
•First home buyers rising strongly in NSW
•What’s Dot been up to for the month
The Cost of Funding
The Reserve Bank of Australia says rising mortgage interest rates pose no risk to the housing market, saying the cost of funding a home loan is still below that of a year ago.
In minutes of its September 4 policy meeting the RBA says that, at the time of the board gathering, lenders accounting for 40% of the market had raised mortgage rates (most by about 0.14 of a percentage point). “These increases would imply a small rise in the average housing loan rate, unwinding about half of the decline observed in the average housing loan rate over the preceding year,” it said.
Economists argue that increased mortgage interest rates will delay any official interest rate increase by the RBA. The banking sector has justified raising interest rates on the basis of higher wholesale funding costs. But the RBA says bank funding costs remain low relative to history and “consistent with the low level of the cash rate”.
The minutes indicate the RBA remains confident the next move in official interest rates will be upward as strong economic growth eventually converts to lower unemployment and higher inflation. But there is no rush to adjust the benchmark cash rate, which has remained at a record low 1.5% for more than two years.
RBA on hold until 2021 – Westpac
The official cash rate is likely to remain on hold not only through 2018 and 2019 but also 2020, according to Westpac chief economist Bill Evans. Evans has made the counter-consensus call that the Reserve Bank of Australia will keep interest rates on hold until 2021, defying RBA Governor Philip Lowe’s suggestion that the official rate will rise “at some point” in the near future.
Market economists see the cash rate increasing in the second half of 2019, but Evans has extended his forecast for no change in policy settings until December 2020 (he previously forecast no change until March 2020). Evans notes that new lending to housing investors has fallen 25% over the last year; housing credit growth is likely to slow from 6.5% in the year to September 2017 to 4% in 2018/19 and 2019/20.
Earlier, Lowe told Australians to get their household budgets in order to prepare for higher rates “at some point” – it being almost eight years since the last increase.
First home buyers rising strongly in NSW
First-home buyers are “storming” back into the NSW property market. New figures show almost one in four NSW home buyers are now first-home buyers, compared to one in ten a year ago.Premier Gladys Berejiklian says there has been a tripling in the number of people taking advantage of the broadened stamp duty concessions brought in last year. In the first full year of operation, around 35,300 people have saved up to $34,360 each.
The reforms from July last year extended first-home buyer stamp duty concessions to existing homes, not just new homes. ABS figures show housing finance approvals to NSW first-home buyers have risen 74%, the highest of any state. Treasurer Dominic Perrottet says first-home buyers have collectively saved more than half a billion dollars in just over a year. “We’re seeing first-home buyers storm back into the market here,” he says.
Top suburbs benefiting from the trend include Liverpool (722 new home-owners, 2.4 times higher than the previous year), Campbelltown and Kingswood.
What has Dot been up to for the month?
Given the launch of our E-book – the 15 Year itch, we have had quite a positive reception to it leading to more time being spent shooting content videos and putting them up on our social media channels – All purely content based! If you haven’t checked them out, we advise to strongly do so!
As always, we hope you enjoyed reading the blog and should you have any questions, please feel free to email Connecting@dotfinancial.com.au or you can call us on 1300 000 DOT (368).