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Property buyers feel effects of rate rises across the Tasman
20.01.2004 -
SYDNEY - Australians' appetite for borrowing to buy property appeared to wane in November as approvals for home financing fell for a second month, coinciding with a rise in interest rates.
Data released yesterday showed that housing finance for November fell a seasonally adjusted 3.9 per cent. Market forecasts had centred on a 3 per cent decline, and the result followed a revised 1.3 per cent decline in October.
But interest-rate markets barely moved on the data and are still pricing in a third quarter-point tightening by the Reserve Bank of Australia.
The bank, trying to curb ballooning household debt associated with a prolonged housing boom, raised the cash rate by 25 basis points in both November and December to take it to 5.25 per cent.
UBS chief economist Scott Haslem said yesterday's data supported unchanged rates next month - as the bank awaited better-quality data on the economy's condition early this year - and a final, 25 basis point tightening in March.
Westpac senior economist Andrew Hanlan said that although some argued for rates to be put on hold, he still expected the bank to nudge them a little higher.
"Interest rates are still relatively low at 5.25 per cent and the RBA needs to give consideration to the strength of the overall economy, at a time when unemployment has declined to a 14-year low," he said.
The bank's own November data on credit lending showed consumers were unfazed by the first tightening, with housing credit growing 1.8 per cent in the month to be up 23.3 per cent over the year, matching the record set in August 1994.
Recent data has also shown consumer confidence at fresh nine-year highs, despite the two rate rises, and retail spending remaining strong, boosted by low unemployment.
But a 4 per cent surge in the Australian dollar so far this year, on top of its 34 per cent rally last year, could be one factor keeping the bank from raising interest rates again because exporters are feeling the pinch.
For now, the currency appears to be correcting under its own steam, slipping below 76USc yesterday as the US dollar finds renewed demand. The Aussie hit a 6 1/2 year peak of 78.13USc last week.
As home buyers feared further rate rises, fixed loans became more popular, accounting for 15.2 per cent of total loans in November, up from 12.7 per cent in October and from around 6 per cent in early 2003.
Access Economics director Chris Richardson said the Australian economy would fare well this year, helped by rising exports, an improving global economy, the end of Australia's worst drought in a century and tax cuts ahead of a year-end election.
But the currency's strength would push the economy to the wall in 2005, as world growth eased and rising interest rates deflated the property boom.
"The dagger through the heart of the Australian economy will come in the first half of 2005."
- REUTERS
Regards
Property buyers feel effects of rate rises across the Tasman
20.01.2004 -
SYDNEY - Australians' appetite for borrowing to buy property appeared to wane in November as approvals for home financing fell for a second month, coinciding with a rise in interest rates.
Data released yesterday showed that housing finance for November fell a seasonally adjusted 3.9 per cent. Market forecasts had centred on a 3 per cent decline, and the result followed a revised 1.3 per cent decline in October.
But interest-rate markets barely moved on the data and are still pricing in a third quarter-point tightening by the Reserve Bank of Australia.
The bank, trying to curb ballooning household debt associated with a prolonged housing boom, raised the cash rate by 25 basis points in both November and December to take it to 5.25 per cent.
UBS chief economist Scott Haslem said yesterday's data supported unchanged rates next month - as the bank awaited better-quality data on the economy's condition early this year - and a final, 25 basis point tightening in March.
Westpac senior economist Andrew Hanlan said that although some argued for rates to be put on hold, he still expected the bank to nudge them a little higher.
"Interest rates are still relatively low at 5.25 per cent and the RBA needs to give consideration to the strength of the overall economy, at a time when unemployment has declined to a 14-year low," he said.
The bank's own November data on credit lending showed consumers were unfazed by the first tightening, with housing credit growing 1.8 per cent in the month to be up 23.3 per cent over the year, matching the record set in August 1994.
Recent data has also shown consumer confidence at fresh nine-year highs, despite the two rate rises, and retail spending remaining strong, boosted by low unemployment.
But a 4 per cent surge in the Australian dollar so far this year, on top of its 34 per cent rally last year, could be one factor keeping the bank from raising interest rates again because exporters are feeling the pinch.
For now, the currency appears to be correcting under its own steam, slipping below 76USc yesterday as the US dollar finds renewed demand. The Aussie hit a 6 1/2 year peak of 78.13USc last week.
As home buyers feared further rate rises, fixed loans became more popular, accounting for 15.2 per cent of total loans in November, up from 12.7 per cent in October and from around 6 per cent in early 2003.
Access Economics director Chris Richardson said the Australian economy would fare well this year, helped by rising exports, an improving global economy, the end of Australia's worst drought in a century and tax cuts ahead of a year-end election.
But the currency's strength would push the economy to the wall in 2005, as world growth eased and rising interest rates deflated the property boom.
"The dagger through the heart of the Australian economy will come in the first half of 2005."
- REUTERS
Regards