Lower Rates Spur Lending in Australia

New reports for end-of-year lending in Australia show that rate drops in the last two months of 2011 spurred a 2.1% increase in new-home lending in December. Housing …

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New reports for end-of-year lending in Australia show that rate drops in the last two months of 2011 spurred a 2.1% increase in new-home lending in December. Housing Industry Association analysts are concerned, however, that a recent decision by two of Australia’s biggest banks to raise variable rates may undo the growth. Loans for established homes also rose 2.3% in December, as did loans for first-time homebuyers. Experts believe the news will help bolster borrower sentiment and bring more people into the market; however, the possibility of a rate hike may act to stifle growth. For more on this continue reading the following article from Property Wire.

Housing finance figures for December 2011 reveal that the November and December official interest rate cuts had a positive impact on home buyer confidence and new home lending in Australia, according to the Housing Industry Association, the voice of Australia’s residential building industry.

‘The 2.1% increase in new home lending in the month of December 2011 suggests the potential of a modest revival in the lending market. Let’s hope, however, that the recent decision by two of our big banks to independently lift their variable lending rates does not undo the work of the Reserve Bank,’ said HIA senior economist, Andrew Harvey.

‘The improvement in lending for established homes also continued, with the number of loans up by 2.3% in December, again highlighting the impact that the changed interest rate cycle had begun to have on homebuyer confidence,’ explained Harvey.

The recovery in the aggregate number of loans for first time buyers also continued, with these loans comprising 20.9% of all dwellings financed in December 2011, which compares to 16.9% a year earlier, he pointed out.

‘While modest, the improvement in lending following the late 2011 interest rate cuts suggest a growing number of people are preparing to enter the housing market. There is a risk, however, that the recent action of two trading banks could undo the modest improvement in demand,’ warned Harvey.

‘Effectively the decision could dash more than four months of work on improving sentiment, and in an economy for which the Reserve Bank has just downgraded its growth forecasts the last thing we need is this additional weight in the saddle bags already dragging on consumer sentiment,’ he added.

In December 2011 the seasonally adjusted number of loans for new housing increased by 13.3% in Victoria, 1.1% in Western Australia, 43.7% in the Northern Territory, and 3.9% in the Australian Capital Territory.

The number of loans for new housing fell by 3.6% in New South Wales, 4.9% in Queensland, 9.3% in South Australia, and 1.9% in Tasmania.

This article was republished with permission from Property Wire.

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