Nobel Finance Sydney – Money Matters Newsfeed

Interest rates are unlikely to change until November at the earliest, according to RP Data.

Tim Lawless, senior research analyst at RP Data, said that an extended period of interest rate stability is in store.

“All the fundamentals apart from inflation are looking subdued,” he said. “There may be some increase in consumer goods over the next few months, which could spur the RBA to act after the next CPI data is released in October. However, that means there’s very little chance of an increase before the Monetary Policy Board’s November meeting.”

This will provide some welcome certainty to the housing market, Lawless added, particularly for owner-occupiers.

“The renewed certainty over rates may even translate to a small bounce in first homebuyers,” he said. “However, price growth is still likely to be relatively flat for the next six months at least, and we’re likely to see the balance of the market swing back towards buyers.”

Mortgage Choice spokesperson Kristy Sheppard agreed an extended period of rate stability would be good news for borrowers.

“This will be a great relief for anyone repaying a variable interest loan or approaching the end

of their fixed-rate term, just as it will be for those who are looking forward to jumping into the market during spring. A rate rise would

surely have discouraged many people from acting on their property plans, be that selling up or purchasing. Now there is another reason to move ahead with confidence.”

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Self-managed super funds (SMSFs) are increasingly

investing in property, according to new figures. SMSF administrator Multiport has revealed that, out of the $1.lbn invested in funds it administers, 17% was allocated to property either directly or through trusts and funds as of 30 June.

This brings SMSF property investment levels to their highest level since December 2008. Multiport CEO John Mcllroy attributed the increase to the better performance of listed property trusts. The figures also revealed that SMSF asset allocation is still dominated by investment in shares, with Australian shares taking up 40% of SMSF assets (down from 42.6% in March). Cash and short-term deposit holdings accounted for 21.4% of SMSF assets.

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Australia’s major banks continue to perform well despite ongoing funding challenges, according to Fitch Ratings.

Fitch director Tim Roche said despite some deterioration, Australian bank asset quality remains sound.

“It is one of the main reasons why the major banks have retained access to wholesale funding markets during the crisis,” he said.

Nevertheless, Mr Roche said the banks’ reliance on offshore wholesale funding means they remain vulnerable to future disruptions in global markets.

Fitch expects asset quality deterioration to continue to moderate through the remainder of 2010 and into 2011, barring a significant weakening in the global economic recovery.

At the same time, a sharp rise in house prices over the past year may indicate a level of overheating in the housing market; however underwriting standards appear sound, with banks having tightened them since 2007.

Furthermore, the risk of material loss from the mortgage portfolios is largely mitigated through the use of lenders’ mortgage insurance.

Fitch’s long term IDR outlook for ANZ is ‘positive’ with a AA- rating, while CBA, NAB and Westpac have a ‘stable’ outlook, with a AA rating.

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Australia’s leading economists still expect a number of hikes before year end as the government seeks to keep inflation in check

THIS MONTH the RBA decided against lifting the cash rate but the question home owners are asking is for how long?

The latest inflation figures have shown that the Consumer Price Index (CPI) rose by 0.6 per cent in the June quarter, lifting the annual rate to 3.1 per cent ^-just outside the RBA’s target of 2 to 3 per cent.

In its monetary policy statement this month the RBA board said growth trend factors, coupled with close to target inflation and

an uncertain global outlook, influenced its decision to leave the cash rate unchanged for the third month running – good news for now.

What also bodes well for home owners is the slowing of house price growth and lower levels of lending activity – a clear indication that previous rate rises have taken effect.

RP Data senior research analyst Tim Lawless has welcomed the RBA’s decision to keep

rates on hold, saying the slowdown in market conditions has prompted the rate halt.

“Month-to-month capital gains in Australia’s capital city housing markets had been trending downwards since January and slipped into the negatives with a result of-0.7 per cent in June,” Mr Lawless said earlier this month.

“The slowdown in Australia’s capital city housing markets, together with a moderate CPI figure, which was below market expectations, would have been an important consideration by the RBA to keep rates on hold,” he said.

But while rates remain on hold for now economists warn that home buyers can expect to see further increases in the future.

AMP chief economist Shane Oliver said despite a similar prediction, the RBA still retains a clear tightening bias and will continue to keep inflation within target levels.

“The RBA will continue bearing down on the economy,” Mr Oliver said.

Mr Oliver added that high export prices coupled with improved business investment, consumer spending and solid employment recovery will see rates reach “near top” levels of 5.5 percent by end of 2011.

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Homesafe Solutions has welcomed the stamp duty relief for seniors announced as part of the NSW Budget.
The equity release provider described it as an innovative public-policy response to the challenge posed by an ageing population. Peter Szabo, managing director of Homesafe, said: “Retirees should be aware that equity release products can provide them with the financial means to maintain their independence and current lifestyle, without the need to downsize their home. Many seniors have inadequate retirement savings to enable them to enjoy quality of life during their retirement. Equity release products provide a valuable alternative to selling off the family home while providing retirement income.”

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