Property boom and interest rate impacting Australian homebuyers... What the ‘cash rate’ means for Australia... Big banks boost mobile lending network...
Property boom and interest rate impacting Australian homebuyers
According to an article in the Financial Times, a sustained property market boom in major Australian cities partly fuelled a flood of foreign money, which is pricing first-time buyers out of the market — and causing problems for policy makers and the country’s central bank. At a time when Regulators warn of an increased risk of destabilising bubbles, and it is becoming ever harder for first-time buyers to get their foot on the property ladder.
“We’d prefer a house but they are just too expensive,” says Kate Homan, one of dozens of people squeezed inside a two-bedroom apartment in a Sydney suburb listed for sale at $750,000 (US$600,000). “The heartbreaking thing is when you come to these auctions and see investors outbidding everyone else.”
Fears of a housing bubble in Sydney are complicating the Reserve Bank of Australia’s efforts to stimulate growth. The central bank has cut interest rates to a historic low of 2 per cent but further monetary easing may depend on a moderation in house inflation in Sydney and Melbourne.
“The RBA would find it hard to cut again if prices continue to surge,” says Ivan Colhoun, economist at National Australia Bank.
What the ‘cash rate’ means for Australia
There has been mixed reactions to Australia’s interest rate cut but no matter what the reaction, it appears that the result is that banks are prepared to take more risk by lending more money to households and businesses, according to new research by the University of Sydney. Hence, a low cash rate ought to stimulate economic activity.
In a nutshell: more bank lending means a higher chance of banks running out of money. But a lower cash rate means the cost to a bank of running out of money is not as great. Therefore, a lower cash rate encourages banks to lend more, the study reads.
In theory, the cash rate should have an indirect, not a direct, effect on mortgage, deposit and credit card rates. It shouldn’t trigger a knee-jerk rate cut.
Take mortgages: if the Reserve Bank lowers the cash rate, it might make Westpac more willing to lend to new homebuyers. However, simply being “more willing” to lend isn’t enough. If it wants to encourage more people to take out mortgages, it needs to lure them in. One way of luring them in is by lowering interest rates.
Big banks boost mobile lending network
A major Australian bank has bolstered its network of mobile loan writers and grown mortgage lending above system for the fifth consecutive year, according to an article in Mortgage Business Australia.
ANZ Bank noted in a recent ASX update that over the year to March, its team of mobile loan writers had grown by 43 per cent, according to the article. In NSW, ANZ increased its number of mobile lenders by 50 per cent over the period.
In the 12 months to the half year 2015, the major bank recorded a 28.4 per cent increase in home loan growth from $6.7 billion to $8.6 billion. Unlike its closest competitors, CBA, NAB and Westpac, ANZ has chosen not to acquire mortgage broker businesses as part of its strategy, instead focusing on building a network of accredited loan writers.
Victoria remains the bank’s key mortgage market with 29.4 per cent of home loans compared with 27 per cent for NSW and ACT; 17.7 per cent in Queensland; 16.2 per cent in WA and 9.7 per cent in all other states and territories.
Moving forward, ANZ chief executive Mike Smith said that the bank is looking to target areas that will boost profitability.
According to an article in the Financial Times, a sustained property market boom in major Australian cities partly fuelled a flood of foreign money, which is pricing first-time buyers out of the market — and causing problems for policy makers and the country’s central bank. At a time when Regulators warn of an increased risk of destabilising bubbles, and it is becoming ever harder for first-time buyers to get their foot on the property ladder.
“We’d prefer a house but they are just too expensive,” says Kate Homan, one of dozens of people squeezed inside a two-bedroom apartment in a Sydney suburb listed for sale at $750,000 (US$600,000). “The heartbreaking thing is when you come to these auctions and see investors outbidding everyone else.”
Fears of a housing bubble in Sydney are complicating the Reserve Bank of Australia’s efforts to stimulate growth. The central bank has cut interest rates to a historic low of 2 per cent but further monetary easing may depend on a moderation in house inflation in Sydney and Melbourne.
“The RBA would find it hard to cut again if prices continue to surge,” says Ivan Colhoun, economist at National Australia Bank.
What the ‘cash rate’ means for Australia
There has been mixed reactions to Australia’s interest rate cut but no matter what the reaction, it appears that the result is that banks are prepared to take more risk by lending more money to households and businesses, according to new research by the University of Sydney. Hence, a low cash rate ought to stimulate economic activity.
In a nutshell: more bank lending means a higher chance of banks running out of money. But a lower cash rate means the cost to a bank of running out of money is not as great. Therefore, a lower cash rate encourages banks to lend more, the study reads.
In theory, the cash rate should have an indirect, not a direct, effect on mortgage, deposit and credit card rates. It shouldn’t trigger a knee-jerk rate cut.
Take mortgages: if the Reserve Bank lowers the cash rate, it might make Westpac more willing to lend to new homebuyers. However, simply being “more willing” to lend isn’t enough. If it wants to encourage more people to take out mortgages, it needs to lure them in. One way of luring them in is by lowering interest rates.
Big banks boost mobile lending network
A major Australian bank has bolstered its network of mobile loan writers and grown mortgage lending above system for the fifth consecutive year, according to an article in Mortgage Business Australia.
ANZ Bank noted in a recent ASX update that over the year to March, its team of mobile loan writers had grown by 43 per cent, according to the article. In NSW, ANZ increased its number of mobile lenders by 50 per cent over the period.
In the 12 months to the half year 2015, the major bank recorded a 28.4 per cent increase in home loan growth from $6.7 billion to $8.6 billion. Unlike its closest competitors, CBA, NAB and Westpac, ANZ has chosen not to acquire mortgage broker businesses as part of its strategy, instead focusing on building a network of accredited loan writers.
Victoria remains the bank’s key mortgage market with 29.4 per cent of home loans compared with 27 per cent for NSW and ACT; 17.7 per cent in Queensland; 16.2 per cent in WA and 9.7 per cent in all other states and territories.
Moving forward, ANZ chief executive Mike Smith said that the bank is looking to target areas that will boost profitability.
