Real estate loan ratesAustralian real estate buyers are hurting over real estate loan rates, reduced family support, housing bubble concerns.
Many real property owners are hoping we won’t be seeing an interest rate rise in June, even thought its likely and we predicted it last month.
Many economists now say that an real estate loan rates rise could push homeowners and renters over the top as mortgage rates for homeowners and landlords would increase the cost of living. It would also make home buyers stay away from the real estate market and further add to falling home values. That would have to hurt bank profits.
Federal Budget cuts deepening concern for middle Australia
There are indications that the Federal Budget’s cuts to consumers has put a dent in consumer spending, with middle class Australia most affected and most likely to reduce spending.
Double whammy for mortgage holders as Moodys downgrades big banks credit rating [again]
In other areas of uncertainty about euro fears, and house values holding up in the wake of loan rate rises, the US ratings agency Moody’s has downgraded the credit-worthiness of Australia’s big four banks from AA1 to AA2.
This means higher borrowing costs for these banks, and that means real estate loan rate increases without the need for the RBA to add any further fuel to the fire.
Higher borrowing costs would force the big banks to lift real estate loan rates outside the Reserve Bank’s official cycle.
Next RBA meeting on June 7
When the Reserve Bank of Australia meets on June 7 some feel that a cash rate increase might be the last straw straw for real estate values.
Since home values peaked in 2010 we have seen a lowering of home values across Australia and a further rate rise, on top of increased borrowing costs will make home buyers think twice about buying a home in this housing market, given a perception that residential real estate in Australia are over valued.
Even without a rate rise I expect home prices for established homes to fall further, so any real estate loan rate increase at this time would only deepen the slide in home values.