Worrying signs for the Australian economy as home loans fall to 40 years low – despite record low interest rates
- The mortgage interest rate of investors is at the weakest level ever, dating from 1976
- The Australian Prudential Regulation Authority revealed a disturbing economic sign
- This happened despite the fact that interest rates have been low for three years now
- US investment bank JPMorgan predicts four interest rate cuts in the coming year
Home loan activity has been at its weakest level since the mid-1970s, despite low interest rates.
Investors in particular have been deterred after the bank regulator has imposed stricter lending rules and Labor has promised the election to scrap negative gearing tax benefits for existing properties.
The Australian data from the Prudential Regulation Authority that were released on Friday showed that the annual growth rate of mortgage growth in April has slowed to the lowest level since the records began in 1976.
The slowdown in growth continued to deteriorate, although interest rates had been at a historic low of 1.5 percent for almost three years.
Data from the Australian Prudential Regulation Authority, released on Friday, showed that the annual pace of mortgage growth slowed to its weakest level in April since records started in 1976 (photos are houses in western Sydney)
A CommSec analysis of the APRA data showed that investor loans were also just before the fourth consecutive month in April, when annual growth slowed to a historic low of 0.6 percent.
When the loans from investors and property owners were combined, the annual growth rate of 3.9 percent was also at a historic low.
US investment bank JP Morgan expects interest rates to fall by a quarter of a percentage point when the Reserve Bank of Australia meets next Tuesday for its June meeting.
A new expansion is also expected in August, followed by two additional cuts in February and May next year, which would raise the cash rate to a new low of 0.5 percent.
JPMorgan senior economist Ben Jarman said record low interest rates had not stimulated spending among heavily paid home borrowers.
& # 39; If your interest rates are very low, those rates will clearly have less impact & # 39 ;, he told Daily Mail Australia on Friday.
Mr Jarman said that four more interest rate cuts would put more money in the pockets of home borrowers and increase consumer spending.
& # 39; They are trying to give a disposable income to households in debt to support consumption & # 39 ;, he said.
US investment bank JP Morgan expects the Reserve Bank of Australia to lower interest rates four times, from June this year to May 2020, which would raise the cash rate to a new record low of 0.5 percent (stock image)
However, he did not expect the Reserve Bank's interest rate cuts to lead to a recovery in the housing market, with CoreLogic data showing a record depth of 16% in the median house price of Sydney since July 2017.
& # 39; Policy makers actually have fairly limited expectations about how many homes can really benefit from it & # 39 ;, said Mr. Jarman.
Problems with the house of Australia
April property price changes
Sydney: -0.7% to median of $ 780,672
Melbourne: -0.6% to $ 621,759
Brisbane: -0.4% to 484,047
Perth: -0.4% to $ 440,546
Adelaide: -0.1% to $ 430,352
Darwin: -1.2% to $ 390,621
Hobart: -0.9% to $ 452.302
Canberra: + 0.4% to $ 596,405
Source: Corelogic April 2019 data
& # 39; But you could at least say that it removes some disadvantage of some really ugly scenarios if you provide that relaxation.
& # 39; Living can remain weak, but not extremely weak. & # 39;
The housing markets of Sydney and Melbourne reached their peak in 2017 after APRA hijacked investors and interest-bearing loans.
This month APRA deleted a rule for lenders to model how a potential borrower could operate a mortgage if the interest rates were 7.25 percent.
CommSec chief economist Craig James said APRA & easing credit rules and the surprise re-election of a coalition government can give a little boost to home financing.
& # 39; Before the election, Aussies were reluctant to borrow, & # 39; he said.
& # 39; But lower interest rates, tax cuts, APRA changes in mortgage lending service level, the increase in the minimum wage and government support for first home buyers can lead to an increase in homeowners and investors lending. & # 39;
CoreLogic real estate data for May will be released on Monday.
. (TagsToTranslate) Dailymail (t) news