The Reserve Bank is likely to cut the official cash interest rate in early 2016, researchers say... More warnings about the dangers of buying off the plan...
Major bank calls RBA rate cut in early 2016
Researchers from one of Australia’s biggest banks have weighed into the discussion surrounding interest rates, believing the Reserve Bank is likely to cut the official cash interest rate in early 2016.
In a research note published last week, ANZ chief economist Warren Hogan said the bank expects the RBA to make two successive cuts to the cash rate early next year.
“ANZ expects the RBA to cut interest rates by a further 50 basis points at some point in early 2016,” Hogan said in the note
“While timing is tricky, February and March are the likely candidates,” he said.
Hogan said the low Australian dollar and the reduced level of support the housing industry is providing the economy would be key factors guiding the RBA decision.
“Two factors are likely to drive the change – waning support to non-mining sectors of the Australian economy from the housing market and continuing weakness in the Australian dollar internationally,” he said.
“RBA governor Glenn Stevens has previously said growth in the non-mining economy needs to be above average for a couple of years to eat into spare capacity. This is currently around average at best with little likelihood of improving. At the same time mining investment has much further to fall.”
While home owners and investors may be hanging out for the cuts in the hope they would see mortgage repayments go down, they may be waiting in vain according to one analyst.
Jonathon Mott, financial analyst from investment bank UBS this week said interest rates on home loans are likely to increase regardless of action taken by the central bank as banks adjust to changed requirements around their capital situations.
“Additional re-pricing may be necessary just to offset the additional funding costs the banks may face,” Mott said “…the vast majority, or even all, of any future rate cuts are now unlikely to be passed onto borrowers,” he added.
More warnings about the dangers of buying off the plan​
While the New South Wales government is taking step to stop people being burnt by off the plan developers, a high level official from one of Australia’s major banks has warned of other dangers off the plan buyers face.
Speaking at the HIA-Cordell construction outlook breakfast in Sydney on Thursday, Westpac chief economist Bill Evans said the APRA led clampdown on investor lending was presenting huge challenges for those with off the plan purchase agreements.
Evans believes APRA’s mandate that investor lending levels should not grow by more than 10% each year means many off the plan buyers could be left high and dry when it comes time to settle.
“The issues about pre-sales is [sic] a real worry,” Evans said.
“Someone commits to a pre-sale and in two years they go to the bank and say, 'Can I have my money now?' and the bank has no obligation to give them the money,” he said.
Evans is not the first to air concerns about the future of off the plan sales, with Todd Hunter, founder of mortgage brokers and buyer’s agency wHeregroup, expressing a similar opinion last month.
Originally from Your Investment Property, Phil McCarroll
Researchers from one of Australia’s biggest banks have weighed into the discussion surrounding interest rates, believing the Reserve Bank is likely to cut the official cash interest rate in early 2016.
In a research note published last week, ANZ chief economist Warren Hogan said the bank expects the RBA to make two successive cuts to the cash rate early next year.
“ANZ expects the RBA to cut interest rates by a further 50 basis points at some point in early 2016,” Hogan said in the note
“While timing is tricky, February and March are the likely candidates,” he said.
Hogan said the low Australian dollar and the reduced level of support the housing industry is providing the economy would be key factors guiding the RBA decision.
“Two factors are likely to drive the change – waning support to non-mining sectors of the Australian economy from the housing market and continuing weakness in the Australian dollar internationally,” he said.
“RBA governor Glenn Stevens has previously said growth in the non-mining economy needs to be above average for a couple of years to eat into spare capacity. This is currently around average at best with little likelihood of improving. At the same time mining investment has much further to fall.”
While home owners and investors may be hanging out for the cuts in the hope they would see mortgage repayments go down, they may be waiting in vain according to one analyst.
Jonathon Mott, financial analyst from investment bank UBS this week said interest rates on home loans are likely to increase regardless of action taken by the central bank as banks adjust to changed requirements around their capital situations.
“Additional re-pricing may be necessary just to offset the additional funding costs the banks may face,” Mott said “…the vast majority, or even all, of any future rate cuts are now unlikely to be passed onto borrowers,” he added.
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More warnings about the dangers of buying off the plan​
While the New South Wales government is taking step to stop people being burnt by off the plan developers, a high level official from one of Australia’s major banks has warned of other dangers off the plan buyers face.
Speaking at the HIA-Cordell construction outlook breakfast in Sydney on Thursday, Westpac chief economist Bill Evans said the APRA led clampdown on investor lending was presenting huge challenges for those with off the plan purchase agreements.
Evans believes APRA’s mandate that investor lending levels should not grow by more than 10% each year means many off the plan buyers could be left high and dry when it comes time to settle.
“The issues about pre-sales is [sic] a real worry,” Evans said.
“Someone commits to a pre-sale and in two years they go to the bank and say, 'Can I have my money now?' and the bank has no obligation to give them the money,” he said.
Evans is not the first to air concerns about the future of off the plan sales, with Todd Hunter, founder of mortgage brokers and buyer’s agency wHeregroup, expressing a similar opinion last month.
Originally from Your Investment Property, Phil McCarroll
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