May 24, 2011
Rising living costs and housing affordability pose a greater barrier to home ownership than the fear of interest rate rises, a new Loan Market survey has found.
Home loan approvals are at a 10-year low and while there seems to be no doubt interest rates will rise in the coming months, the RBA remains vague on an exact date.
However, a new report from Loan Market reveals the cost of living and high housing prices are a greater disincentive to borrowers than the threat of a rate hike.
The Loan Market survey conducted in April indicates that many potential homeowners are not keen on taking on home loan debt when they are already paying extra at the petrol bowser, for utilities and food.
Only 12 percent of surveyed respondents said interest rates were a deterrent while 65 percent felt affordability was keeping them out of the market.
Minutes from the RBA’s latest board meeting on May 4 stated higher interest rates “were likely to be required at some point,” with economists predicting it will happen within the next few months, or by August at the latest.
Australians are currently in a pattern of household frugality and the RBA indicated the next rise would be influenced by household spending, which it predicted will increase as the labour market tightens and wages rise on the back of the resources boom.
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