Record $6.4b In Home Loans Fuelled By Low Interest Rates
The Age
Thursday May 13, 1999
Australia's banks and housing lenders signed a record $6.4 billion of home loans in March, as almost 50,000 households took advantage of low interest rates to change their homes, build new ones, or refinance their mortgages.
Victoria is once again leading the spurt in demand. The number of new home loans in the state jumped 15 per cent from March last year to 11,336, seasonally adjusted, while the actual amount of money lent soared by 33 per cent to $1378 million. The average Victorian loan has risen in a year from $105,000 to $121,000.
In another sign that consumer confidence in the economy is high, the Bureau of Statistics reported that even after seasonal adjustment, $5.6 billion was lent out nationally for home mortgages, almost 9 per cent above the previous record set in January.
Demand is booming for all forms of housing. Seasonally adjusted loans to build new homes jumped to 6936, the highest monthly tally since 1994, 7987 homeowners refinanced their homes and 26,809 bought an established dwelling.
Last week the Bureau reported that the real value of retail sales shot up by 3.7 per cent in the March quarter, by far the highest quarterly growth in turnover it has ever recorded. Taken together, the retail and housing figures suggests consumers, emboldened by Australia's continuing strong growth, are now casting off their restraint.
But the good news for the economy was seen as bad news by the money markets. Yesterday they hiked the implied yield on September's 90-day bill futures to 5 per cent. This means they expect the Reserve Bank will move within months to rein in the boom by raising interest rates a notch.
Long-term bond yields also rose yesterday, reflecting fears that higher spending will mean higher inflation. The dollar jumped back over 67 cents, and the All Ordinaries index on the Stock Exchange climbed back over 3000, aided by a new clamor for Internet-related stocks.
Westpac's economists predicted that Treasury's Budget forecast of 3 per cent in 1999-2000 would prove too cautious. They expect the economy to grow 3.7 per cent, led by a 12 per cent jump in housing investment, with unemployment falling to 6.7 per cent by next June and 6 per cent by June 2001.
Westpac predicted that the preparations for the GST itself would add $3 billion to the economy in the year ahead, as firms stockpile supplies and finished goods before they become subject to the new tax. Consumers too will stock up on goods now untaxed, while homeowners rush to construct their dream homes or get their renovations done.
Yesterday's housing finance figures suggest it may be right. In seasonally adjusted terms, both the total number of loans approved and those specifically for new homes were the highest for any month since 1994.
Banks led the way, writing out 41,181 home mortgages, which the Bureau seasonally adjusted down to 36,096. Moreover, the average size of home loans approved by the banks has swollen 15 per cent in the last year, from $113,985 to $131,000.
Mortgage managers still give out the biggest loans, lending out an average of just over $150,000. But their clientele comprises just 6.5 per cent of the market, compared to 84 per cent for the banks.
OPINION 16: Editorial
© 1999 The Age