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While the indicators for borrowing activity in 2009 are looking up, many brokers believe further rate relief from the RBA is needed for a truly sustainable market recovery.
The latest abs figures reveal that the number of owner-occupier housing finance commitments climbed a substantial 6.4 per cent in December following the RBA’S successive cash rate cuts.
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The percentage of first home buyer commitments also surged to 25.4 per cent of all commitments, indicating that the government’s inflated first home buyer incentives are encouraging this market segment to take the plunge.
But despite the positive data, mortgage business’ latest straw poll of 527 mortgage brokers has revealed that 47 per cent believe more cuts are needed to further boost borrowing activity.
An optimistic 46 per cent believe the rate reductions to date are enough to stimulate market activity, while the current economic uncertainty saw 7 per cent of respondents reluctant to draw conclusions.
Mark Mellick of Auspak finance in Sydney said enquiry levels had picked up noticeably, particularly among first home buyers as well as current home owners looking to upgrade or with enough equity to take advantage of current investment opportunities.
But Mr Mellick said further rate reductions and an extension to the first home owner grant boost were needed to see a sustained improvement in activity.
“I’d expect the RBA to reduce the cash rate by another 1 per cent, but in smaller, less aggressive increments than it has previously,” he said.
Mr Mellick said he was factoring in several rate reductions of around 0.25 per cent over the coming months with a low point of 2.25 per cent by July.
Shannon Foley of multiple property services in Victoria said she would also like to see a further 1 per cent come off the current cash rate.
“We’ve seen a substantial increase in activity in recent months," she said.
"Our key market is investors and their interest is certainly increasing, but i think we need another percentage point reduction if first home buyers and mums and dads are really going to come back in and for investor activity to hold up.”
Straw poll
Is the 100bp February rate cut enough to boost borrowing activity?
Yes: 46%
No: 47%
Don’t know: 7%
