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09:53:22 am

Australia Urged To Follow New Zealand's Lead And Impose Limits On Low Deposit Home Loans

The RBA watching New Zealand slamming the brakes on house prices

The Reserve Bank hopes that will allow it to keep rates lower for longer, keeping a lid on any further rise in the already over-valued New Zealand dollar and supporting export industries. Australia and New Zealand already have a lot in common... and as of this month they also share record low official interest rates of two-and-a-half per cent. The difference is that New Zealand has had such low rates for almost two-and-a-half years, and its economy is now on the way up, not down. Fitch Ratings financial institutions analyst Andrea Jaehne says that is pushing house prices higher. "Historically low mortgage rates are now also playing a role in the housing market," she said. "People are employed ... we have seen stronger mortgage growth in the market and as a result house prices have gone up." It has also been encouraging a growing number of Kiwis to borrow heavily to fund a home purchase. Almost a third of recent new home loans have involved bank's lending more than 80 per cent of the purchase value. That means the home buyers had a deposit of less than 20 per cent.
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Australian Banks Cut Fixed Mortgages Loan Rates in Latest Home-Loan War

The new round of rate cuts is possible because of lower funding costs for banks and strong profit growth. Kirsty Lamont of comparison Web site Mozo said the situation provides a dilemma for borrowers if they should lock now or hold back and wait for more rate cuts. Ms Lamont said the lowest fixed one-year rate is that of the Greater Building Society at 4.74 per cent. Due to the changing lending conditions such as out-of-cycle rate cuts independent of RBA decisions, fixed home loans finances through RateCIty reached 18.45 per cent, the highest proportion in five years. In Westpac, take-up levels for fixed home loans doubled from 8 per cent to between 15 and 20 per cent when it cut its two-year rate to 4.99 per cent in February 2013. At St George, fixed-rate loans went up to 30 per cent from 10 per cent when the bank cut its mortgage rate. But in the case of the National Australia Bank, its offer of the lowest interest rates among the Big 4 failed to boost the lender's satisfaction rating among its clients. The monthly DBM Consultants' Business Financial Services Monitor said NAB's satisfaction rating averaged 7 out of 10 in April, while ANZ got s lower 6.9 rating.
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Australian Home Loans Rise on Record-Low Rates

The central bank rate has cut interest rates steeply since late 2011 to a record low 2.5%, in a bid to spur weaker parts of the economy like consumer sentiment and construction. Loan approvals to build new houses fell 2.1% in July from June. Approvals to buy new homes rose 5.9%, while lending for already built houses rose 2.7% in the month. -Write to James Glynn at (END) Dow Jones Newswires 09-08-132148ET Copyright (c) 2013 Dow Jones & Company, Inc. This article appears in: Interactive Charts Default Setting Please note that once you make your selection, it will apply to all future visits to
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