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RBA Leaves Interest Rates on Hold

RBA Leaves Interest Rates on Hold

At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.

The global economy is expanding at a moderate pace, with some further softening in conditions in China and east Asia of late, but stronger US growth. Key commodity prices are much lower than a year ago, in part reflecting increased supply, including from Australia. Australia's terms of trade are falling.

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RBA Says Further Interest Rate Cut Possible

RBA Says Further Interest Rate Cut Possible

The head of the Reserve Bank says the booming Sydney property market gets far too much attention, and further interest rate cuts are possible.

Two years of double digit home price growth in Sydney have heightened fears of a property bubble, which may prove a deterrent to cutting record low interest rates.

But Reserve Bank governor Glenn Stevens says too much attention is given to Sydney, while prices in other capital cities remain under control.

"Popular commentary is, in my opinion, too focused on Sydney prices and pays too little attention to the more disparate trends among the other 80 per cent of Australia," he told a function in New York.

Rates are only one factor driving house price rises, and they need to be balanced against other financial considerations, he said.

That has been behind the RBA's decision to maintain the cash rate at record lows since August 2013, and its willingness to cut again if necessary, Mr Stevens said.

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How profitable is your home?

How profitable is your home

At some stage, your home may well be too small or big for your needs. Or perhaps the size is right, but you want to live in a neighbourhood with better amenities or in a suburb with excellent schools for the kids. If you're paying off a home loan for a house located in an area experiencing solid capital growth, you may even make a profit when you sell!

According to the most recent RP Data Pain and Gain report, 91 percent of all home re-sales during the second quarter earned a gross profit.

In fact, nearly one in three (30.5 percent) of home sellers at least doubled their purchase amount when re-selling! Referring to this bracket of sales, RP Data elaborated:

"The gross profit on these re-sales was $14.4 billion and the average gross profit per profit making transaction was $225,830."

Are you living in a hot spot?

RP Data analysed re-sale statistics in states' capital cities and regional areas. The area with the lowest proportion of re-sales that made a loss was Sydney (2.7 percent), followed by Perth (4.8 percent) and regional Northern Territory (6.4 percent).

In regional Western Australia, 43.4 percent of homes sold during the June quarter made a profit of 100 percent or greater, followed by Perth (40.3 percent), Melbourne (36.8 percent), Darwin (34.5 percent) and regional Northern Territory (33.9 percent).

So if you're living in any of these locations, there's a strong chance you could profit when you sell. But what about on a more local scale?

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Reserve Banks Interest Rate Policy Decision

Reserve Banks Interest Rate Policy Decision

At its meeting yesterday, the Reserve Bank Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined this year.

Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain very low. Emerging market economies are receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates, or other adverse event, over the period ahead.

Reserve Banks Interest Rate Policy Decision

In Australia, growth was firmer around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on line; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.

Interest rates are very low and for some borrowers have continued to edge lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. The increase in dwelling prices has been slower this year than last year, though prices continue to rise. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.

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Home Owners Paying Off Loans Faster

Home Owners Paying Off Loans Faster

Home owners are taking advantage of record low interest rates to pay off their mortgages faster.

The National Australia Bank says new figures show 85 percent of its mortgage customers pay more than their minimum monthly repayments, Fairfax Media reports.

Such NAB customers are ahead by an average of 13 months now, compared with 12 months a year ago — a "meaningful" shift considering the size of the bank's mortgage book, said Antony Cahill, NAB's executive general manager of lending and deposits.

Home Owners Paying Off Loans Faster

The bank has about 16 percent of the mortgage market with a home loan book worth $241 billion.

NAB said its customers are also paying off credit card debt faster, with the number of accounts paid in full rising six percent in the past year.

"These are themes that point to the Australian consumer being a little bit more careful, a little bit more prudent in terms of understanding debt and ensuring they keep that under control," Mr Cahill was quoted as saying.

Last week the major banks cut fixed interest rates to new lows of less than five percent.

Story source: www.finance.ninemsn.com.au

 


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Are Australians missing investment opportunities?

Are Australians missing investment opportunities

Many Australians with home loans are aware of the ability to use the existing equity in their properties in order to further their real estate investment goals but many individuals aren’t actually utilising their equity as they could.

New research from Westpac shows that just 11 percent of Australian homeowners are planning to use their equity to upgrade.

That said, upgrading isn't the only option. Those with sufficient equity in their properties can also use it to invest in real estate, too.

What is home equity?

A property's equity can be calculated by deducting the loan balance from the home's value. If homeowners have purchased real estate in high-growth suburbs, their equity will not only rise as they pay off their mortgages, but also in conjunction with capital growth.

This equity can be used for home renovations, property investment and more.

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RBA Leaves Rates on Hold – For Now!

RBA Leaves Rates on Hold – For Now
Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth appears to have slowed a little in early 2014 but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have continued to decline of late.

Financial conditions overall remain very accommodative. Long-term interest rates have fallen further and risk spreads remain low. Emerging market economies are once again receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates over the period ahead.

In Australia, the economy grew at a below-trend pace in 2013 overall, but growth looks to have been somewhat firmer around the turn of the year. This has resulted partly from very strong increases in resource exports as new capacity has come on stream, but smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand and a strong expansion in housing construction is now under way. At the same time, resources sector investment spending is set to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative, as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued.

RBA Leaves Rates on Hold – For Now

There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently. Recent data confirm that growth in wages has declined noticeably. If these and other domestic costs remain contained, inflation should remain consistent with the target over the next one to two years, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and for some borrowers have edged lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently. The earlier decline in the exchange rate is assisting in achieving balanced growth in the economy, but less so than previously as a result of the higher levels over the past few months. The exchange rate remains high by historical standards, particularly given the further decline in commodity prices.

Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

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Reverse mortgages need a rethink if they’re the new age pension

Reverse mortgages need a rethink if they’re the new age pension

The Commission of Audit has recommended including homes above a certain value in the means test that determines who gets the age pension and how much. Under the proposal, homes valued in excess of A$500,000 would be assessable for singles, while for couples the trigger would be A$750,000.

The family home is currently exempt from the assets test but the commission argues this is inequitable because it means high levels of wealth are sheltered. It suggests a more comprehensive means testing regime be put in place by 2027-28.

If this proposal is picked up by the federal government, it would see a sizable group of retirees required to call on the equity in their homes to help fund their retirement.

It would be a brave government that “forced” pensioners to sell their homes to release that equity, which makes reverse mortgages a likely tool for retirees who need to convert their home into cash flow.

Even now, a reverse mortgage can be an alternative to “downsizing” into a smaller and cheaper home to release funds for retirement.

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Reserve Bank leaves Interest Rates on Hold

Reserve Bank leaves Interest Rates on Hold

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China's growth remains generally in line with policymakers' objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.

Reserve Bank leaves Interest Rates on Hold

Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.

In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.

The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

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Finance data shows housing market improving

Finance data shows housing market improving

Home loans approvals have risen for the seventh month in a row, and the housing sector is expected to strengthen further in the coming months.

The number of home loans approved in July rose 2.4 per cent, the Australian Bureau of Statistics said, which was better than the market forecast of a 2.0 per cent rise.

CommSec chief economist Craig James said he expects the housing market to make more gains as consumer and business confidence improves now that the federal election is out of the way.

"What we would hope that, in a more settled environment, people will start spending, investing and hiring," he said.

"Of all the sectors in the economy, clearly one of the healthiest is housing.

"Housing is best placed to take over the leadership role from mining as the nation's key economic driver.

Loans made for the purchase of new dwellings rose 5.9 per cent in the month but loans for the construction of dwellings fell 2.1 per cent.

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