Posted May 06, 2018 07:10:16The Reserve Bank of Australia (RBA) has admitted it may need to intervene with mortgage lending to help stop a housing bubble that is bursting.
Key points:The RBA has said it is considering an immediate reduction in its mortgage rateThe Reserve bank is also considering reducing mortgage rates for people who already own homesThis would have a knock-on effect on home pricesThe RSB has said the immediate action could mean a reduction in the RBA’s mortgage rate for the first time since it began reducing rates in June 2016.
The bank said in a statement that it was considering the immediate reduction of its mortgage rates by the RBS “in light of the unprecedented nature of the housing market”.
“The RBS will also consider the need to adjust its mortgage loan-to-value ratio to ensure that the rate is not adversely impacted,” the statement said.
“We expect to have further information on this in the coming weeks.”
The RBB’s decision is part of a broader review of mortgage rates that is due to be completed in the next fortnight, but has not been confirmed.
“The review will assess the effectiveness of measures to support the financial stability of the banking system and assess whether such measures would have an adverse impact on the economy,” the RBB said in its statement.
“In the meantime, we will continue to work with policymakers to ensure the appropriate rate cuts and other measures to address the financial stress caused by the housing boom are appropriate and appropriate for the economic environment of Australia.”RBS governor Mark Carney has said there is a “strong case” for the RSB to cut its mortgage interest rate in the face of a housing boom that is driving prices up.
“There are a number of measures that could be taken to reduce mortgage rates in Australia, but these are not yet known,” Mr Carney told the Reserve bank’s annual general meeting on Tuesday.
“I do not know what the right time will be for this to be taken.
He said the RBNZ’s move was “not something that should be taken lightly”.””
There is a strong case for the rate to be reduced and I think that is going to be one of the factors that drives the price of Australian real estate.”
He said the RBNZ’s move was “not something that should be taken lightly”.
“This is a time for the banking sector to make sure that it is providing the best possible advice to its customers,” he said.
The RBC said it was also considering a reduction of mortgage interest rates for existing mortgage holders.
The announcement comes after a survey showed that Australians were paying up to three times more on mortgages than their parents.
The latest mortgage rate survey by the Australian Council of Mortgage Lenders (ACML) found that interest rates were rising by 8.4 per cent over the past year.ACML chief executive Andrew Groom said he had been encouraged by the recent increases in interest rates and was pleased the RBR had “looked into this”.
“However, it is clear that the recent increase in mortgage rates has been driven by the increased cost of servicing loans, as well as by rising mortgage payments and increased household debt,” Mr Groom told ABC Radio Perth.
“That said, we have been encouraged to see that the majority of borrowers in this survey are willing to pay the higher rates, and that the interest rates are relatively low.”
He warned that rates could rise again.
“It is possible that rates will return to their previous level and this is what we would expect given the current level of inflation,” Mr Greave said.
In an email to the ABC, ACML said the average monthly payment for a home mortgage rose by 7.4 percent over the year to $1,500 last month.
Mr Groom, who is also the RBC governor, said the recent interest rate increases had been driven primarily by rising household debt and higher mortgage payments.
“Interest rates in this environment have not been particularly unusual in the past and this has been reflected in the recent rise in interest rate,” he told the ABC.
“However there is an element of the recent rises that reflect the higher cost of mortgages and the cost of refinancing mortgages.”
He also said that although the RUB’s rate had been lower than it was two years ago, the RLB had increased its rate twice in a row, to 0.50 per cent, and 0.60 per cent in 2017.
“While the RAB has had a relatively stable interest rate environment, we do believe that the RGB is facing the most challenging economic environment in the modern financial history of the country,” Mr Grove said.
Mr Carney said the increase in interest would have “significant and adverse consequences” for home prices, and said it would be “very difficult” to change the market if interest rates continued to rise.
“These changes in the terms of trade are likely to have an impact on residential prices in the short-term, but also