An overwhelming number of experts expect interest rates will rise over the next nine months, taking housing affordability to new lows and pushing more first home buyers out of the property market, according to Your Mortgage Magazine Editor Nicki Bourlioufas. A new survey of Australia’s leading economists by Your Mortgage Magazine reveals that the majority (17 out of 22) expect rates will rise by June, 2004, by at least 0.25%. While the Reserve Bank yesterday kept rates on hold, most experts expect rates will remain steady until the first half of 2004. “A combination of higher rates and booming house prices means first home buyers will find it more and more difficult to enter the market,” Bourlioufas said. “House prices are rising much faster than people’s income and this is making mortgages much less affordable.” Of all new home loans taken for owner-occupier purposes in July, 2003, the%age taken by first home buyers was just 13.6%, the lowest level on record, according to the Australian Bureau of Statistics. That number is expected to keep falling as the housing boom continues its run. “Borrowers thinking about taking out a home loan need to factor in higher rates, which will inevitably come,” Bourlioufas said. “Be prudent and assume rates will rise another two or three% and then decide how much you can afford to borrow.” The average mortgage size in Australia is $182,500. A rise in the major banks’ variable lending rate of just 1% to 7.57% from 6.57% would boost home loan repayments by nearly 10% or $117 per month to $1357 on a 25-year loan. “One way of avoiding the impact of higher rates is to consider fixing your home loan or splitting your loan between fixed and variable rates. It may take some of the pain away if rates do rise.”
| Spokesperson | Institution | Dec 3 | Jun 4 | Words of wisdom | ||
| Kieran Davies, Chief Economist | ABN AMRO | 6.57% | n | 6.57% | n | Fixed rates will ease back a bit |
| Jim Miltiadis, General Manager Operations | AIMS Homeloans | 6.57% | n | 7.07% | é | Borrowers should consider splitting and fix now |
| Shane Oliver, Chief Economist | AMP Henderson Global Investors | 6.57% | n | 6.75% | é | Use a mix of fixed and variable rates |
| Saul Eslake, Chief Economist | ANZ Bank | 6.57% | n | 7.07% | é | Lock in up to half borrowings before end-2003 |
| Stephen Halmarick, Director | Citibank | 6.57% | n | 7.07% | é | No comment |
| Rob Emmett, Managing Director | Collins Securities | 6.57% | n | 6.57% | n | Stay variable up until Christmas |
| Simon Arraj, Managing Director | Checkpoint Finance | 6.57% | n | 6.82% | é | If uncertainty is important to you, then fixing may be the right thing to do |
| Warren Hogan, Chief Economist | Credit Suisse First Boston | 6.57% | n | 6.07% | â | We would look for lower fixed rates later this year or early next |
| Stephen White, Chief Economist | First Union Finance | 6.57% | n | 6.57% | n | Rates not expected to rise near term |
| Simon Tennent, Chief Economist | Housing Industry Association | 6.57% | n | 7.07% | é | Consider locking in between now and the end of the year |
| John McGee, Chief Operating Officer | Homeloans Ltd | 6.82% | é | 7.07% | é | Stay variable to remain flexible, less repayment penalties |
| Anthony Thompson, Senior Economist | HSBC | 6.57% | n | 6.82% | é | Fixed rates rising but still attractive for locking-in |
| Glenn Baker, Treasurer | ING Bank | 6.57% | n | 7.07% | é | Fix now, rates will be higher in 2004 |
| Andrew Pease, Chief Economist | JPMorgan | 6.57% | n | 6.57% | n | Variable rates are more likely to rise than fall, so fixed rates are worth considering |
| Tony Gill, Executive Director | Macquarie Bank | 6.57% | n | 7.07% | é | Split loan and fix half now |
| Alan Oster, Chief Economist | National Australia Bank | 6.57% | n | 7.07% | é | Fixed rates are still rising |
| Mark Cheng, Head of Treasury | Overseas Union Bank | 6.85% | é | 7.30% | é | Last chance to go for fixed |
| Greg Kolivos, General Manager | RAMS Home Loans | 6.57% | n | 6.82% | é | Fix repayments now to reduce any rate rise impact |
| Steve Ryan, Chief Economist | St George Bank | 6.57% | n | 7.07% | é | Fix borrowings two or three years |
| Bill Evans, Chief Economist | Westpac Bank | 6.57% | n | 7.07% | é | No comment |
| Mark Bouris, Executive Chairman | Wizard Financial Services | 6.79% | é | 6.79% | é | Do not fix rates. If you are concerned, try part fixed, part variable |
| Lee Boueri, Managing Director | Yes Home Loans | 6.57% | n | 7.07% | é | Consider splitting now, half fixed and half variable |
Dec 03 June 04
3 economists expect rates to rise 1 expect rates to decrease
19 economists expect no change 4 expect no change Total: 22 respondents
HOME LOAN RATES: YourMortgageMagazine
ECONOMISTS PREDICT WHERE THEY’RE HEADED
17 expect rates to increase
