Banks pass on"¦ time to cut stamp duty

THE Commonwealth Bank and National Australia Bank have led the way passing on the latest rate cut in full to households.

But the latest interest rate is not enough, says Laing+Simmons general manager Leanne Pilkington, who is urging state governments’ to reduce stamp duty.

CBA, the nation’s largest financial institution, and NAB have both reduced the standard variable mortgages by 1% to 6.74%. Westpac has also lowered its rates by 80 basis points to 6.90% whilst the ANZ Bank has yet to make a move.

The property industry has embraced the move, the Real Estate Institute of Australia’s president Noel Dyett said the London Interbank offered rate (libor) rate, which is the rate banks charge for lending to one another has dropped from 4.63% one month ago to 3.01% currently.

“To see that affordability is starting to improve is positive news; however, the REIA is looking for further improvement to make the dream of purchasing a home a reality for more Australians,” he added.

Sydney Chamber of Commerce’s executive director Patricia Forsythe said the latest rate cut will reduce monthly mortgage repayments by about $270 on a $400,000 loan.

“This is particularly positive news for retailers in the lead-up to the most important time of the year for the industry. This decision comes on the back of today’s retail spending figures which showed only modest growth of 0.2% over the quarter,” she added.

In Queensland, Real Estate Institute of QLD managing director Dan Molloy said since September’s interest rate cut, homeowners in the state with an average $300,000 mortgage are saving more than $500 a month.

Real estate agents LJ Hooker’s mnaging director Warren McCarthy said the combination of falling monthly mortgage repayments, the good value on offer in the housing market and, for first home buyers, strong Government incentives has created an excellent buying environment.

Recent figures have highlighted an increase in the first home buyer category following the Federal Government’s boost to the First Home Buyers Grant. This category is likely to continue to remain active up until the enhanced Government grant ends its current phase in June 2009.

“I think that 2009 will see a significant shift in sentiment towards property investments with many Australians taking advantage of the lower interest rates and the increasing realisation that the share market is not going to be recovering in a hurry.” he concluded.

Meanwhile Pilkington said stamp duty continues to be a persistent barrier to a recovery in the New South Wales residential property market.

“Unfortunately, interest rate cuts alone have yet to have a significant impact in terms of stimulating a recovery in the NSW market. There is some anecdotal evidence that increases to the first home owners grant have boosted levels of enquiry from people looking to enter the market, but this has yet to translate to a noticeable increase in sales,” she added.

A recent bankwest report found residential property stamp duty fees have soared 59% — almost double the rise in household income over the same period.

bankwest retail chief executive Ian Corfield said struggling home buyers are forced to set aside at least 20% of their annual household income to pay stamp duty bills in four out of eight capital cities in July 2008 – Sydney, Melbourne, Adelaide and Perth.

Property stamp duty revenues by state

Australian Property Journal