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Interest Rates

By Paul Wrigley

In terms of the overall market, ABS data released last week showed the percentage of first home buyers in the market in April was the highest ever on record at 28%. The data also showed that the average loan size for this buyer segment has increased by $20 000 since the boost was announced, fuelling speculation of a price bubble in the lower price range. Although the boost to the grant was first intended to finish at the end of this month, it has now been extended until October 1st.

In other news, the Commonwealth Bank raised its interest rates on home and business loans by 10 basis points, infuriating the Prime Minister and Treasurer. An AAP article last week quoted Wayne Swan as saying the CBA’s decision was selfish and hindered efforts by the government to lift the country out of the economic crisis. The same article quoted Opposition treasury spokesman Joe Hockey as saying this was only the beginning of increased interest rates due to recent overspending of the Government.

Meanwhile, BIS Shrapnel announced last week their prediction that Australian house prices will rise by 20% over the next three years. The next day the prediction was slammed in reader comments on as well as drawing strong negative criticism by industry experts. Louis Christopher from SQM Research said it was impossible to forecast three years ahead and cited several BIS Shrapnel predictions that have been proven wrong over time.

What is clear is that predictions and property commentary continue to be inconsistent, re-affirming the importance of making decisions with only the current conditions in mind.

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