Australians that are happy to put their money into property for the long term, are being advised to buy now.

Housing Industry Association chief economist Harley Dale said investors with adequate savings would do well to invest in property as it is a real “buyer’s market” at the moment.

“Now is definitely a good time to get into the market,” he said.

“There is a lot of competition between vendors at the moment, which is putting the bargaining power firmly in the hands of the buyer.

“On top of that, the interest rate environment is very kind, thanks to the 50 basis point rate reduction we saw at the end of last year.

“So, if you have the funds to make a financially responsible decision to buy property, then now is definitely a good time to buy.”

Of course, Mr Dale warned any investors entering the property market to bide their time before selling.

“We are not seeing the yields we saw 10 years ago. In many instances, this makes the buying environment even better. But, if you want to see a return on your investment, you have to be in it for the long haul.”

THE ADVISER

Housing has notched up its fourth consecutive quarter of increased affordability.

The HIA-Commonwealth Bank Housing Affordability Index improved by 2.2% in the December 2011 quarter, taking the index to a level 8.3% above that registered in the December 2010 quarter.

HIA senior economist Andrew Harvey said a decrease in mortgage lending rates and continued earnings growth offset a modest increase in the media dwelling price.

“As expected, the interest rate cuts in November and December of last year saw housing affordability
continue to trend in the right direction," Harvey said.

In the most recent quarter average weekly ordinary time earnings posted growth of 0.5 per cent and
mortgage lending rates were down by a sizeable 0.25 percentage points.

Meanwhile, home prices rose by 0.5 per cent in the December quarter although they were down by 1.8 per cent over the year.

AUSTRALIAN BROKER NEWS

NZ today announced it will increase interest rates for variable rate mortgages and small business lending by 0.06%pa.

This is the first time the bank has moved to increase its rates independently of the RBA’s cash rate since it announced its split with the central bank’s pricing in December last year.

According to a statement from the bank, the decision follows ANZ’s monthly interest rate review which considered:

• the intense pressure on retail and business margins in recent months being sustained following:
• increased competition among banks for consumer and business deposits that has provided higher relative returns to ANZ’s 2.9 million deposit customers;
• higher costs paid by ANZ for $8 billion in long-term wholesale funding raised since October 2011 as a result of the economic and financial crisis in Europe which has made money more expensive for all banks to borrow.
•  the stable monetary policy setting announced this week by the Reserve Bank of Australia following successive reductions in the cash rate in late 2011.
•  the competitive environment, the impact of higher rates on customers and on loan growth, and also the need to act in a considered way with growing pockets of weakness in the Australian economy.

Effective 17 February 2012, ANZ’s new standard variable mortgage rate will be 7.36%pa (7.46%pa comparison rate). New small business rates are effective from 17 February.

ANZ will also cut its three year fixed rate mortgage by 0.15% to 5.99%pa as part of its Breakfree banking package.

ANZ CEO Australia Philip Chronican said: “this month we faced a serious dilemma in our review, balancing the rising cost of bank funding including deposit customers’ interests in receiving highly competitive rates, and the expectation of borrowers that we keep lending rates as low as possible.

“In December and January we absorbed the additional funding costs in the hope that funding pressures would ease and that no change in lending rates would be necessary.

"However, margins in retail and business banking have now been squeezed for a number of months and we’ve taken the difficult decision to pass on part of the higher costs to customers while we also get on with taking action to reshape the bank for tougher times.

“Our new monthly interest rate review process recognises that the Reserve Bank’s cash rate alone is not an accurate reflection of bank funding costs, particularly since the global financial crisis which has left all banks with the task of raising funds in volatile global markets and through stronger competition for deposits.

“This change comes with a duty to explain to our customers what drives our decisions and provide greater transparency about our funding costs.

“We also want to assure customers that we are committed to providing competitive products and we hope there will be an opportunity to lower rates in the coming months as greater confidence returns to global funding markets.

“There has been much debate on banks in recent days. While we recognise our decision may leave some people frustrated and even angry, we believe Australia needs safe, well-run commercial banks that aren’t a burden on taxpayers and that can continue to lend. The alternative of weak, constrained banks that we see in the United States and in Europe is a recipe for stagnation and recession in Australia," Mr Chronican said.

THE ADVISER

While the Reserve Bank decided it was prudent to keep the official cash rate on hold at 4.25 per cent at its Board meeting in Sydney yesterday, economists are still confident of another rate cut.

But, according to NAB chief economist Alan Oster, the next rate cut could be some months away.

After yesterday's announcement by the Reserve Bank, Mr Oster said the lender had been forced to revise its original rate projections and delay the next rate cut to May.

“The RBA has made it plain there is a case for cutting rates again if the economy weakens 'materially',” Mr Oster said.

“Our activity forecasts are unchanged at around trend growth through the forecast period. That is we do not see it likely that the RBA will to have to respond to a crunch in activity. Rather, the additional rate cut, if it eventuates, is more likely to come from tightening financial conditions in the face of a high currency, higher funding costs and lower than expected price inflation.

“We have pencilled in one more rate cut in May this year, taking the official cash rate to 4 per cent. After that, it looks like the RBA will be on hold for a considerable time – at least until mid 2013.”

MFAA chief executive Phil Naylor said if this is the case, brokers will be forced to seek out business opportunities, rather than wait for the market to reignite.

“The gauntlet has been thrown down to borrowers, who should be motivated to seek a better mortgage deal, including a lower rate from another lender,” Mr Naylor said.

“Mortgage brokers currently have a market share of 43 per cent of the mortgage market and represent the best chance for borrowers to negotiate a better deal with their own lender or move to another.

“No change to rates, the onus is now on borrowers to seek out a better deal for themselves in a very competitive market. “

THE ADVISER

Westpac has drawn the ire of consumers by being slow in adjusting home loan repayments.

The bank already drew media attention last week in announcing hundreds of job cuts. The Sydney Morning Herald has now reported many Westpac customers have yet to see their repayments adjusted following last year's rate cuts.

According to Fairfax, home loan customers have been told by Westpac that their new repayments would start in March, though the bank had announced rate cuts effective November 14 and December 19. Westpac has claimed the delay is due to the Christmas period.

A Westpac spokesperson told Fairfax that customers could contact the bank to "amend their repayments earlier if they choose". But Fairfax has claimed the delay in passing on the new repayments allows the bank to raise additional funding without borrowing from financial markets.

By Adam Smith   AUSTRALIAN BROKER NEWS