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ISCOVER
Staff Reporter
One rate cut isn’t enough, one industry stakeholder has claimed.
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According to Loan Market Group’s chief operating officer Dean Rushton, further action from the Reserve Bank of Australia is needed to help revive the domestic housing finance market from its lowest level of activity in a decade.
An analysis of Australian Bureau of Statistics figures for home loan approvals and finance commitments since January, 2000, showed that RBA interest rate decisions had been critical in influencing activity.
“The RBA’s decision on Melbourne Cup day to reduce rates to 4.5 per cent – the first cut in more than two and a half years - is a welcome move for the home finance market,” Mr Rushton said.
“In 2008, when the RBA rapidly dropped rates by 4.25 per cent over several months, we saw demand for finance commitments had increased by 32 per cent.
“However in late 2009 when the cash rate began to rise from 3.0 per cent up to a high of 4.75 per cent, there was an historic drop in the market.”
Mr Rushton said while the November 1 reduction was an encouraging start, the RBA may need to do more in the coming months.
“A recent survey we ran showed that the issues occurring in Europe were top of mind for consumers when considering their financial position,” Mr Rushton said.
“These issues are not going away short term and there will be more work to do to stimulate sectors of our economy.
“It’s certainly discouraging to see the number of people obtaining financing fall below levels we saw in the early 2000s when we’ve experienced significant population growth and property development over the past decade.
“Consumer confidence has been low and we’ve seen people holding off spending and borrowing in most sectors as we approach Christmas.
“But the Melbourne Cup day rate cut could be the turning point.”
