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While the indicators for borrowing activity are looking bright, many brokers believe further rate relief from the RBA is necessary for a truly sustainable market recovery.
Figures released by the ABS yesterday showed the number of owner-occupied housing finance commitments climbed by a substantial 6.4 per cent in December after the RBA reduced the cash rate by 3 per cent in just four months.
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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.
Despite these healthy figures, Mortgage Business’ latest straw poll has revealed that 47 per cent of brokers believe more cuts will be needed to boost borrowing activity.
An optimistic 46 per cent believed the rate reductions to date are sufficient enough to motivate more market activity, while economic uncertainty saw 7 per cent of respondents reluctant to draw conclusions.
Mark Mellick of Auspak Finance in Sydney said enquiry levels had certainly picked up, particularly among first home buyers as well as existing home owners looking to upgrade or with enough equity to take advantage of current investment opportunities.
However Mr Mellick said two things would be necessary to underpin a sustained improvement in activity – further rate reductions and an extension to the first home owner grant boost.
“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 would also like to see a further 1 per cent come off the cash rate.
“We’ve seen a substantial increase in activity in recent months. Our key market is investors are their interest is certainly increasing,” Ms Foley commented.
“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 uphold.”
