Latest news with #interestcuts
News.com.au
29-05-2025
- Business
- News.com.au
Banks go to war over Aussie homeowners
Australia's biggest lender Commonwealth Bank has committed to slashing its fixed rates, alongside its variable interest rate offerings in another big boost to homeowners. On the back of successive RBA rate cuts, the Commonwealth Bank has announced it will cut its fixed interest rate home loans on Friday by up to 0.40 percentage points across all fixed terms. That move comes at the same time CBA is trimming its variable mortgages by 0.25 percentage points following the Reserve Bank of Australia's decision to drop the cash rate by 25 basis points to 3.85 per cent on May 20. The CBA move mirrors that of its big four counterparts in Westpac, NAB and ANZ in offering cut price rates to customers and prospective clients. ANZ currently has the lowest one and two year fixed rates among the big four, according to Canstar. While NAB has the lowest three, four and five year fixed rates. The latest moves could give rise to an interest rate war between Australia's biggest lenders as they amp up competition for market share amid shifting mortgage conditions, These are fixed rates for owner-occupiers who are paying off principal and interest. According to tracking, four lenders – BOQ, Community First Bank, Police Bank and Queensland Country Bank – are now offering at least one rate under 5 per cent at 4.99 per cent. Bank Australia also has a green home loan at 4.94 per cent. data insights director, Sally Tindall said she expects mortgage rates will continue to fall, a huge boon to homeowners enduring the cost of living crisis. 'Fixed rates have been falling fairly consistently this year and we expect this activity will continue as banks price in the increasing likelihood of further cash rate cuts,' she said. 'CBA's fixed rate cuts aren't groundbreaking, but rather a bid to inch closer to its key competitors. 'From tomorrow, the bank's lowest variable rate will be sitting at 5.59 per cent, while its lowest fixed rate will be 5.49 per cent. With just a 0.10 percentage point difference, and the possibility of further RBA cuts ramping up, it's hard to see many people jumping at the chance to lock up their mortgage for the next three years. 'We expect banks big and small will continue cutting fixed rates over the next few months. 'We've already got four lenders with at least one fixed rate under 5 per cent, however, this could well become the norm for banks by the end of the year. 'The majors might have to offer a fixed rate in the '4's' if they're serious about getting people to lock in their rate.' However the current situation might not be enough for homeowners to start feeling some relief with Stephen Koukoulas – regarded by The Australian Financial Review – as one of Australia's most influential economists – saying struggling Aussies need more. 'People are still not changing the way they spend,' Koukoulas, who is a former senior economic adviser to the Prime Minister's Office, told Mark Bouris' Yellow Brick Road podcast. 'We need to see three or four rate changes before we see a real change from interest rate relief.' Koukoulas said the vast majority of Aussies are still battling with financial concerns despite overall improvements in the economy, including a reduction in inflation. 'Interest rates are still very restrictive on the economy,' he said. 'They are still causing financial stress through the cost of living issue. Inflation has fallen but cost of living is still very much about mortgage serviceability. '[Worries about] cost of living are not gone, it is still bad.'
ABC News
25-05-2025
- Business
- ABC News
Affordability up, but access to housing market to worsen as interest rates fall
One of the four reasons house prices started rising at twice the rate of incomes and GDP around the turn of the century was that the Reserve Bank cut interest rates six times in 2001 without a recession. Now it's happening again: five cuts this time (probably) and no recession; in fact, unemployment is 4.1 per cent, not the 6.5 per cent it was in 2001. Interest rates were cut in 2001 because a recession in the United States had followed the dotcom crash of March 2000, and it was a fair enough precaution by the RBA, in part to stop the exchange rate rising too much. That didn't work — the Australian currency appreciated more than 50 per cent between 2001 and 2003 as global speculators took their money out of the US stock market and a commodity boom got started as China joined the global trading system. The other three things that happened around the same time were the 50 per cent capital gains discount at the end of 1999, the return of first home buyer grants in 2000 and the huge rise in immigration in the mid-2000s. The doubling and then tripling of immigration began with the removal on July 1, 2001, of the distinction between "gazetted" and "non-gazetted" countries in the issuing of foreign student visas. That system had been in place since 1990 as a way of controlling the influx of students from China (a non-gazetted country) following the Tiananmen Square massacre in 1987 and Bob Hawke's subsequent granting of permanent residency to 40,000 Chinese students. The welcome end of discrimination against students from certain countries led to a boom in students from both China and India, which was further supercharged in 2006, when hairdressing and cooking were added to the tertiary courses that were given preferential treatment for visas. The combination of those four things — rate cuts, capital gains tax discount, first home buyer grants and a boom in immigration — produced a sustained lift in housing demand that was not matched by any increase in housing construction or infrastructure. It took house prices from around 3-4 times average income to 8-9 times over 25 years and led to the crisis that now dominates the economy, politics and, importantly, the relationship between generations. And now, population growth is back at 2 per cent a year, as it was in the late-2000s, first home buyer grants are back, tax is still payable on only half of any capital gain, and the RBA is once again in the middle of a cycle of interest rate cuts with no recession. The average increase in house prices in the two years following the start of the past 10 rate cutting cycles has been 20 per cent, although that's distorted by the massive 60 per cent rise in house prices when the cash rate was cut from 18 per cent to 7.5 per cent after January 1990. Remove that aberration and the average rise in house prices when interest rates are cut is still 15 per cent. What seems clear is that when interest rates are cut, home buyers add the savings in mortgage repayments onto the price they're prepared to pay for a house, but when interest rates rise again, they don't sell the house but cut back other spending, so there's little downward pressure on prices to offset the rise. The result is that the decline in house prices when rates are rising is always much less than the increase that accompanies rates being cut. So, what can we expect this time, given that housing is already "unaffordable"? Well, prices have increased 1.4 per cent in the past three months in anticipation of the rate cuts, which is 50 per cent more than the average increase in incomes of 0.9 per cent over the same period, even though housing was already apparently unaffordable in January. It obviously wasn't. The thing is that housing affordability is a function of both price and borrowing capacity, so it's probably better to describe the problem as one of accessibility rather than affordability, which rises and falls inversely with interest rates. After all, if housing was genuinely unaffordable, prices wouldn't rise … but they are! Obviously, it's affordable for some. They have increased by 17 per cent since April 2023, even as interest rates went up another three times. A better measure of the housing problem may be the time it takes to save a deposit, which has gone from six years to at least 12 years, which means housing ownership is now effectively accessible only to those who can get money from their parents or elsewhere. The share of 25- to 29-year-old owner-occupiers is declining — from 43 per cent in 2001 to 36 per cent now. And with affordability now improving again as interest rates come down, accessibility is likely to worsen further as prices rise some more. Here we go again. Note that the four things that happened around the year 2000 to make house prices rise faster than incomes and sow the seeds of the current crisis were all about demand, not supply. Yet, government policy, at both the state and federal level, to deal with the problem is now all about supply, not demand, apart from some (so far) ineffective attempts to reduce immigration. Will supply respond sufficiently to government efforts to increase it, and lead to an oversupply of housing so that prices don't rise? Doubtful. At best it's a long-term solution — there's none in the short-term. Removing the capital gains discount and negative gearing would probably lead to the sale of a lot of investment properties, but that won't increase the supply of housing — it will just mean a lot of tenants get booted out while the number of houses stays the same. In the meantime, consumer price inflation is under control so that the Reserve Bank feels comfortable cutting interest rates, which means that house price inflation is on the march again. Alan Kohler is finance presenter and columnist on ABC News and he also writes for Intelligent Investor.
ABC News
19-05-2025
- Business
- ABC News
RBA expected to cut interest rates, says Westpac chief economist
Westpac chief economist Luci Ellis expects a quarter of percentage point to be shaved off the cash rate, and she's also pencilled in two further cuts in August and November.
Daily Mail
14-05-2025
- Business
- Daily Mail
Home sales rise at Vistry Group on falling rates - but questions raised over social housing focus
Home sales have ticked up at Vistry Group in recent weeks, as expected interest rate cuts led to lower mortgage costs. However, an analyst has raised concerns that a lack of clarity on social housing funding from the Government may harm the firm, which builds many of its homes in partnership with organisations such as housing associations. The housebuilder, formed in 2020 from a merger of Bovis Homes and Linden Homes, said it had sold 0.91 homes per week at each of its developments since the start of 2025, and 1.32 in the last eight weeks. This is up from 0.59 in the period between January and 26 March, when the company was affected by a subdued volume of partner-funded transactions. This is where private sector developers build homes on behalf of other organisations, often social housing to be used by housing associations. Vistry noted partner-funded activity had remained at a 'relatively low level' because of 'investment constraints' while funding for new affordable homes waits to become available. However, the firm said sales to home buyers had improved as mortgage lenders have broadened their product ranges and slashed borrowing costs in anticipation of further expected cuts to the Bank of England base rate. Britain's central bank has reduced interest rates by 0.25 percentage points on four occasions since August 2024 in response to decreasing inflation, with the latest cut occurring last Thursday and taking the base rate to 4.25 per cent. Since then, most major banks have lowered their mortgage rates. Santander has announced the launch of multiple new mortgage deals with sub-4 per cent rates. Meanwhile, Barclays introduced the market's lowest five-year fixed rate deal for homebuyers purchasing with a 40 per cent deposit. Vistry forecasts both open market and partner-funded home volumes for 2025 to be at a 'similar level' to the prior year. Concern over Government housing funding An analyst has raised concerns that unclear government funding plans for social and affordable housing could negatively affect firms like Vistry, who focus on'partner-funded' developments. Anthony Codling, managing director at RBC Capital Markets, said: 'Until the Government announces a significant funding program for social and affordable housing, Vistry may find itself in the wrong place at the wrong time whilst other housebuilders make hay in the warmest spring on record. 'The trading statement is trying to give the impression of "everything is fine and there is nothing to see here." 'But, the statement points to continued weakness in the partner funded model, the market Vistry is focused on, whereas the market it isn't focused on, traditional housing, is doing well. 'Until the Government announce a significant funding program for social and affordable housing, Vistry may find itself in the wrong place at the wrong time whilst other housebuilders make hay in the warmest spring on record.' In late March, Chancellor Rachel Reeves and Deputy Prime Minister Angela Rayner unveiled an additional £2billion of cash towards building up to 18,000 new affordable homes. It said the properties would begin construction by March 2027 and be finished by the end of this Parliament in June 2029. Additional information on how the funding will be allocated is expected following next month's spending review. The government has promised to deliver 1.5 million homes over five years, partly by allowing building on lower-quality' grey belt' land and mandatory housing targets for councils. Vistry Group shares were 0.9 per cent lower at 627.4p on late Wednesday afternoon, meaning their value has approximately halved in the past year.
