Higher rates dampen housing activity
Home finance activity is waning on the back of higher interest rates and living expenses.
Recent data from the Australian Bureau of Statistics found that auction clearance rates were down significantly during the spring of 2010.
Loan Market’s chief operating officer Dean Rushton likened the season to a “damp squib”.
“Successive interest rate rises by the Reserve Bank of Australia and the banks lifting rates out of cycle had a major impact on the home finance market,” Mr Rushton said.
“The combination of the rate rises and the loss of the boosted First Home Owners Grant also took first time buyers out of the market during 2010.
“We can’t see first home buyers coming back into the market any time soon.”
Mr Rushton said the RBA’s Melbourne Cup Day decision to lift the cash rate from 4.5 per cent to 4.75 per cent surprised the market and jolted consumer confidence.
“The RBA’s interest rate strategy has certainly had an impact on the home finance sector,” he said.
“The RBA action has put a lot of consumers under pressure in the lead up to Christmas and the banks have also lifted rates higher than the central bank to offset increased funding costs.”