Will the cash rate pause spark false hope as mortgage season kicks off?
- All 25 experts in the finder.com.au Reserve Bank Survey correct with no cash rate change
- Figures show growing trend of borrowers building homes – up 10% in July compared to June
- Borrowers urged to factor in 2% buffer for interest rate hikes next year.
September 2, 2014, Sydney – Today’s official cash rate pause is not expected to spark renewed activity for the home loan market, as mortgage season officially kicks off, according to one of Australia’s biggest comparison websites finder.com.au.
All 25 experts in the finder.com.au monthly Reserve Bank Survey were correct with their prediction that the cash rate would remain on hold at 2.50 percent today, with the vast majority expecting rates to start rising next year. Just one of the 25 experts, from Urbis, is expecting the cash rate could rise by the end of this year or just after.
Michelle Hutchison, Money Expert at finder.com.au, said that despite the fact that the cash rate has remained on hold and at a record low of 2.5 percent for over a year, (the last cash rate move was a drop in August 2013), it doesn't appear to be encouraging first-time borrowers to hit the property market.
"It would be optimistic to think that today’s cash rate pause will encourage new borrowers to hit the property market. In fact, increasing house prices as well as the low supply for land available and fewer government incentives are pushing many first homebuyers out of the market.
Since the cash rate began falling in November 2011, the proportion of first homebuyer home loans out of all home loans financed has dropped. Over 20 percent or one in five home loans financed were first home buyers in November 2011, compared to 13 percent in June 2014.
However, the growing trend for buying land to build property and buying new homes is increasing, as borrowers look to take advantage of government incentives in some states.
The latest Australian Bureau of Statistics (ABS) data released today and analysed by finder.com.au, shows a 10 percent increase in the total number of building approvals in July, with the Northern Territory jumping by 181 percent month on month.
Queensland was the only state to have experienced a drop in building approvals, by 4 percent, from 3,358 approved dwellings in June to 3,236 in July.
Total number of dwelling units approved in each state:
|State||July, 2014||June, 2014||Difference||Percentage Difference|
Source: finder.com.au, ABS number of dwelling units approved (original)
Use this table on your website:
"We also found that the number of home loans for new properties for the past 12 months to June 2014 was up by 40 percent and construction loans has increased by 15 percent compared to five years ago, while home loans financed for established properties dropped by 3 percent.
“There were over 33,000 new home loans financed compared to about 24,000 in the year to June 2009. There were more than 70,000 home loans financed for construction in the 12 months to June 2014 compared to 61,162 for the same period five years ago. While established home loans financed for the year to June 2014 dropped by almost 14,000 compared to five years ago, from over 530,000 in the 12 months to June 2009 to about 516,000.
“Whether you’re planning to build a home, buy brand new or buy an established property this mortgage season, make sure you factor in rising interest rates. Our survey shows that interest rates will rise next year so include a buffer of at least 2 percentage points higher, which is an extra $400 per month for a $300,000 home loan,” said Mrs Hutchison.
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The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is Australia's most visited comparison website and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares 250 credit and debit cards from 31 providers, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au to find better (Source: Google Analytics).