glenn stevens

The head of the Reserve Bank says the booming Sydney property market gets far too much attention, and further interest rate cuts are possible.

Two years of double digit home price growth in Sydney have heightened fears of a property bubble, which may prove a deterrent to cutting record low interest rates.

But Reserve Bank governor Glenn Stevens says too much attention is given to Sydney, while prices in other capital cities remain under control.

"Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia," he told a function in New York.

Rates are only one factor driving house price rises, and they need to be balanced against other financial considerations, he said.

That has been behind the RBA's decision to maintain the cash rate at record lows since August 2013, and its willingness to cut again if necessary, Mr Stevens said.

"The board has, moreover, clearly signalled a willingness to lower it even further, should that be helpful in securing sustainable economic growth."

But other policies, including spending by the federal government, also need to contribute to economic growth, he said.

"Any help in boosting sustainable growth from other policies would, of course, be welcome," Mr Stevens said, just weeks before Treasurer Joe Hockey delivers his second budget.

"In particular, things that could credibly be seen as lifting prospects for future income, and increasing confidence in those prospects, would give easy monetary policy a good deal more traction."

The RBA boss also said he expects the Australian dollar to fall further, despite its recent hold roughly between 78 US cents and 76 US cents.

"The Australian dollar has declined and will very likely fall further yet, over time," Mr Stevens said.

Source: http://finance.ninemsn.com.au

Tag: home loans

 

glenn stevens

The head of the Reserve Bank says the booming Sydney property market gets far too much attention, and further interest rate cuts are possible.

Two years of double digit home price growth in Sydney have heightened fears of a property bubble, which may prove a deterrent to cutting record low interest rates.

But Reserve Bank governor Glenn Stevens says too much attention is given to Sydney, while prices in other capital cities remain under control.

"Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia," he told a function in New York.

Rates are only one factor driving house price rises, and they need to be balanced against other financial considerations, he said.

That has been behind the RBA’s decision to maintain the cash rate at record lows since August 2013, and its willingness to cut again if necessary, Mr Stevens said.

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how proftable is your homei

At some stage, your home may well be too small or big for your needs. Or perhaps the size is right, but you want to live in a neighbourhood with better amenities or in a suburb with excellent schools for the kids. If you’re paying off a home loan for a house located in an area experiencing solid capital growth, you may even make a profit when you sell!

According to the most recent RP Data Pain and Gain report, 91 percent of all home re-sales during the second quarter earned a gross profit.

In fact, nearly one in three (30.5 percent) of home sellers at least doubled their purchase amount when re-selling! Referring to this bracket of sales, RP Data elaborated:

"The gross profit on these re-sales was $14.4 billion and the average gross profit per profit making transaction was $225,830."

Are you living in a hot spot?

RP Data analysed re-sale statistics in states’ capital cities and regional areas. The area with the lowest proportion of re-sales that made a loss was Sydney (2.7 percent), followed by Perth (4.8 percent) and regional Northern Territory (6.4 percent).

In regional Western Australia, 43.4 percent of homes sold during the June quarter made a profit of 100 percent or greater, followed by Perth (40.3 percent), Melbourne (36.8 percent), Darwin (34.5 percent) and regional Northern Territory (33.9 percent).

So if you’re living in any of these locations, there’s a strong chance you could profit when you sell. But what about on a more local scale?

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Reserve bank no 2

At its meeting yesterday, the Reserve Bank Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China’s growth remains generally in line with policymakers’ objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined this year.

Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain very low. Emerging market economies are receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates, or other adverse event, over the period ahead.

In Australia, growth was firmer around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on line; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.

Interest rates are very low and for some borrowers have continued to edge lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. The increase in dwelling prices has been slower this year than last year, though prices continue to rise. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.

Home loan

Home owners are taking advantage of record low interest rates to pay off their mortgages faster.

The National Australia Bank says new figures show 85 percent of its mortgage customers pay more than their minimum monthly repayments, Fairfax Media reports.

Such NAB customers are ahead by an average of 13 months now, compared with 12 months a year ago — a "meaningful" shift considering the size of the bank’s mortgage book, said Antony Cahill, NAB’s executive general manager of lending and deposits.

The bank has about 16 percent of the mortgage market with a home loan book worth $241 billion.

NAB said its customers are also paying off credit card debt faster, with the number of accounts paid in full rising six percent in the past year.

"These are themes that point to the Australian consumer being a little bit more careful, a little bit more prudent in terms of understanding debt and ensuring they keep that under control," Mr Cahill was quoted as saying.

Last week the major banks cut fixed interest rates to new lows of less than five percent.

Story source: www.finance.ninemsn.com.au


Property as an investment

Many Australians with home loans are aware of the ability to use the existing equity in their properties in order to further their real estate investment goals but many individuals aren’t actually utilising their equity as they could.

New research from Westpac shows that just 11 percent of Australian homeowners are planning to use their equity to upgrade.

That said, upgrading isn’t the only option. Those with sufficient equity in their properties can also use it to invest in real estate, too.

What is home equity?

A property’s equity can be calculated by deducting the loan balance from the home’s value. If homeowners have purchased real estate in high-growth suburbs, their equity will not only rise as they pay off their mortgages, but also in conjunction with capital growth.

This equity can be used for home renovations, property investment and more.

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