Good news for mortgage holders, as anticipated the Reserve Bank Board decided to leave rates unchanged at 4.75% at its October meeting. Governor Glenn Stevens says uncertainty in the US and Europe continues to have a negative impact on confidence. Westpac believes the Reserve Bank will soon cut rates.
Speaking of banks, the big four have cut mortgage rates to remain competitive, but analysts say the cuts won't last. A study of Australia's mortgage industry by JP Morgan and Fujitsu shows home lending growth has slowed down over the year. The report says last year's interest rate rise on Melbourne Cup day, global debt and natural disasters have contributed to a slowing of credit growth to an average rate of 6.5 per cent. Lenders have been competing hard on price, Westpac has even announced a $1,000 cash back on new mortgages over a quarter of a million dollars. With a lack of new home buyers in the market, refinancing of old mortgages has been the main driver of lending growth. Customers are looking for cheaper alternatives, but rate cutting can't go on forever if the banks want to maintain their profits.
Meanwhile, building approvals rose 11.4 per cent in August, seasonally adjusted, mostly due to the building of units and a rebound in Queensland. Projects in Queensland had been held back in order to qualify for the state government's $10,000 grant, which came into effect on August 1st. Outside of these two areas - high rises and rebuilding after the Queensland floods, conditions were softer and are likely to drop in the future. The strength in building approvals was not in private sector housing, which actually fell one per cent over the month. The bounce was owing to "other dwellings" which soared 35 per cent in August.
And stamp duty was on the agenda at the Prime Minister's Tax Forum. The Real Estate Institute of Australia has been calling for tax reform to improve housing affordability. Specifically, the body is wanting to abolish stamp duty. The Queensland government has said it would consider scrapping stamp duty, but only if it was compensated by the Federal government.
