Archive for March, 2010
Friday, March 12th, 2010
Broker News report that Challenger reject the claims that there will be a negative impact caused by the letter writing campaign being promoted in the finance industry at the moment. This position is contrary to that of the Mortgage and Finance Industry Association of Australia - MFAA.
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Friday, March 12th, 2010
The proportion of mortgages taken out by first time home buyers have doubled in Victoria since the expansion of the first time home owners grant in October, according to a report.
Sales of mortgages to first time home-buyers jumped to 25.3% of total mortgages in December, from 13.8% in September, according to the AFG Mortgage Index, released today.
"Younger people with reasonably secure jobs have become an important force in the property market during the past few months," said Mark Hewitt, general manager of sales and operations at mortgage broker Australian Finance Group in a statement.
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Friday, March 12th, 2010
A survey has found Australian households are coping well with the effects of the global economic downturn.
The survey by the Mortgage and Financial Association of Australia has found 75 per cent of mortgage holders are easily making their home loan repayments.
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Friday, March 12th, 2010
We wake up this morning and all the stimulus is gone - thanks to Senator Nick Xenophon. The Government's $42 billion "nation-building and job plan" has stalled.
The Coalition finance spokesman, Joe Hockey, had said it should be opposed because some measures were too big and badly targeted. Understandably, you might be forgiven for thinking he was talking about himself.
The latest package of measures, which range from insulating 2.7 million homes to cash handouts to an assortment of needy people, comes on top of innumerable other billions poured into ailing sectors, such as cars ($6.2 billion), plus pensioners, lower-wage earners, local government and first-home buyers ($10 billion all up).
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Friday, March 12th, 2010
THIS morning in Canberra, Reserve Bank of Australia governor Glenn Stevens is making one of his regular appearances before the House of Representatives economics committee. But the extraordinary collapse in the global economy makes this appearance unlike any before it.
Committee chairman Craig Thompson told The Australian on Tuesday that a key topic would be what the Reserve Bank would do to support economic activity as interest rates got closer to zero. "We want to know what happens after that (zero), if there is a further need for monetary policy loosening," he said.
This threatens to take today's discussion into potentially quite dangerous territory, even if Thompson is unaware of it.
The Government and the Reserve Bank have been at pains to point out that Australia has a much healthier banking system than much of the rest of the world. Australia is not the US or Japan, where rates are already effectively zero, nor Britain, where there is every chance they soon will be.
Recognition of this is crucially important in avoiding the collapse in confidence in banks that has hit these countries and that governments are finding it extremely difficult to deal with. To raise the prospect of zero interest rates in Australia as a serious possibility, and have the Reserve Bank governor discuss it as such, is to invite a panicky reassessment of our financial system and all this could entail.
To be clear, the problem is not that central banks are powerless once nominal interest rates hit zero.
The chairman of the US Federal Reserve, Ben Bernanke, made clear in a lecture at the London School of Economics in January that the Fed has an extensive policy tool kit to deal with this situation. But the reason the Fed is having to use this tool kit is because interest rates have proved ineffective, and because the US financial system had seized up, with its big banks arguably insolvent, so the Fed is operating as the banker to the system.
Neither of these things is true of Australia. Our banks are solvent and lending, and monetary policy here still has traction or, as central bankers like to say, the monetary transmission mechanism is working. The minutes of the Reserve Bank's February 3 board meeting tell us that members spent time discussing this: "Members observed that in many countries the central bank rate reductions had flowed through to lending rates only to a limited extent, in particular for housing. They noted that the transmission on monetary policy changes to lending rates had been much more effective in Australia."
The bank's February Statement on Monetary Policy points out that in the US, for example, the Federal Reserve reduced official rates by five percentage points between August 2007 and December 2008, but average mortgage rates on outstanding home loans fell by only 0.15 percentage points.
In contrast, the Reserve Bank cut policy rates here by three percentage points in the second half of 2008 and the average rate on outstanding mortgages fell by two percentage points. February's one percentage point rate cut has been passed on in full.
This is a crucial difference because an important way in which interest rate cuts boost economic growth is through cuts in home mortgage rates. Lower mortgage rates on existing loans reduce households' interest payments, which increases the income available to indebted borrowers, who tend to have a higher propensity tospend.
Lower rates on new home loans also boost demand for housing, supporting house prices and residential building activity. In Australia's case this has also been boosted by the Rudd Government's $21,000 first home owner grants. With housing affordability at its best level for a decade, there are early signs the policy isworking.
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