<a href="https://www.apartments.com.au/developers/sunland-group">Sunland Group</a> has officially lodged plans for its first Gold Coast apartment project since the departure of the Abedian family from the company three years ago, unveiling a new high-rise proposal for a prominent Broadbeach corner site on Old Burleigh Road.

The application was submitted by an entity directed by Tom Jamieson, stepson of longtime Sunland leader Soheil Abedian, and Riaz Rezvanipour, brother-in-law of Sahba Abedian, Soheil’s son.

Sunland acquired the 1,283 sqm site on the corner of Old Burleigh Road and Armrick Avenue for $9.5 million late last year and is now seeking approval for a <a href="https://www.apartments.com.au/new-apartments/99-101-old-burleigh-road-broadbeach-qld-4218">42-storey tower with 81 apartments</a>.

<img alt="First look: Sunland Group returns to Broadbeach with new Old Burleigh Road tower plans" data-entity-type="file" data-entity-uuid="fea2946d-90ee-4cfc-babe-2a8ad5db2cb6" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/pers.png?VersionId=BV0fihJw31nDIQ8ozY_h3GbS8mxDyhnm" />

Designed by <a href="https://www.apartments.com.au/architects/contreras-earl-architecture">Contreras Earl Architecture</a>, the proposed tower at 99-101 Old Burleigh Road would deliver a predominantly larger-format apartment mix aimed at the owner-occupier market. Plans include 17 two-bedroom apartments, 55 three-bedroom apartments, and nine four-bedroom residences across 35 residential levels.

The development also incorporates three basement levels, four podium parking levels, two levels of communal recreation facilities, and rooftop plant and equipment. A total of 189 car spaces are proposed, significantly exceeding the 90 spaces required under the planning scheme.

The architecture adopts a sculpted, curvilinear form, with deep wraparound balconies and integrated landscaping intended to soften the tower’s vertical expression. The planning report states the building’s “slender footprint/form provides a complimentary yet varied built form within the local streetscape” and contributes to “a varied, yet ordered skyline.”

Contreras Earl noted in its Architectural Statement that from the early stages, the project addressed a fundamental challenge: how to accommodate the required residential yield while avoiding the conventional model of a tower sitting on a rigid, fully resolved parking podium.

“The most direct response would have been to consolidate parking into a singular, flat podium and extrude a repetitive tower above,” the statement said. “While efficient, this approach would result in a consolidated built form with limited engagement with the surrounding landscape and public realm.”

Instead, the conventional podium model was “deliberately rejected”. The architects described the base of the building as “a landscaped architectural condition where structure, planting and circulation are integrated”.

“Rather than presenting a continuous built mass, the base of the building is articulated through a series of concrete planter elements that organise the podium into a fragmented system,” the statement said. “This approach reduces the perceived bulk of the lower levels while establishing a more permeable interface with the streetscape and adjacent open space.”

<img alt="Sunland" data-entity-type="file" data-entity-uuid="923fad8d-c960-4527-8fbe-975cf1ddf88d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-25%20at%2010.32.03%E2%80%AFAM.png?VersionId=pngwb0hYOIUpq9vDw6F2EsOiVuHF3DiX" />

&nbsp;

The site sits within the High Density Residential Zone and inside the City of Gold Coast’s unrestricted “HX” building height area, where the planning framework anticipates intensified residential development tied to the expanding light rail corridor. The planning report notes the area is undergoing “transition toward more intense development forms” given its proximity to Broadbeach, Surfers Paradise, and high-frequency public transport infrastructure.

Positioned directly opposite Broadbeach Park and within walking distance of Florida Gardens light rail station, the development would sit among a rapidly evolving stretch of Old Burleigh Road that has become one of the Gold Coast’s most active apartment development corridors.

The application joins a growing pipeline of luxury residential projects reshaping Broadbeach, including nearby developments by 5Point Projects, Polycell, and Graya.

The planning report argues the project contributes toward the Gold Coast’s long-term housing targets under the South East Queensland Regional Plan, which forecasts the need for more than 100,000 additional high-rise dwellings across the city by 2046.

<section data-scroll-anchor="false" data-testid="conversation-turn-4" data-turn="assistant" data-turn-id="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-1" data-turn-id-container="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-1" dir="auto">
The Abedian family departed Sunland Group in late 2023, ending a four-decade association with the company, and subsequently established the private development firm Abedian &amp; Co. The group is currently delivering <a href="https://www.apartments.com.au/new-apartments/greenmount-residences-cnr-hill-street-and-marine-parade-coolangatta-qld-4225">Greenmount Residences</a> at Rainbow Bay and recently launched <a href="https://www.apartments.com.au/new-apartments/18-mary-avenue-14-18-mary-avenue-broadbeach-qld-4218">18 Mary Avenue</a> in Broadbeach.
</section>

Joel Robinson

First look: Sunland Group returns to Broadbeach new apartment market with new Old Burleigh Road tower plans

The Minns Labor Government has established the new Bays West Delivery Authority to lead the development&nbsp;of the Bays West Precinct and Blackwattle Bay Precinct.&nbsp;

The Authority is charged with creating Sydney’s newest precinct, a thriving, connected, sustainable hub with White Bay Power Station as its cultural heart. Its vision is to build on the area’s natural, cultural and industrial history to shape a vibrant new neighbourhood.

The precinct will deliver up to 8,500 well-located homes, including a minimum of 10 per cent affordable and essential worker homes. Combine new housing with public open space, opening public access to the waterfront for the first time in more than 100 years, while retaining important deep-water facilities to support Sydney’s working harbour.

Located just minutes from the Sydney CBD and connected to a world-class metro, ferry, walking and cycling links, the Bays West precinct will rebalance housing growth towards well-serviced inner-city locations and help tackle the state’s housing crisis.

The Bays West Delivery Authority,&nbsp;an agency of the Department of Planning, Housing and Infrastructure, will report to the NSW Minister for Lands and Property who already has oversight of major precinct renewal projects including at Blackwattle Bay and Barangaroo.

As part of the broader Bays West transformation, the Minns Government recently announced that a proposal from Lendlease to redevelop part of the Bays West Precinct has progressed to Stage 2 of the NSW Government’s unsolicited proposals process.

<img alt="Sydney" data-entity-type="file" data-entity-uuid="2ed71eb9-d8e8-4fa7-b9d1-de4531dcf2f3" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-25%20at%209.42.31%E2%80%AFAM.png?VersionId=IDryFIbped9SNDg72LEN_EecvhUsOPvp" />

The Minns Labor Government has also confirmed the Bays West precinct will have a new suburb name. This will be the first major suburb built in close proximity to Sydney’s CBD in decades and will encompass the area currently being referred to as Bays West, including Glebe Island and the White Bay Power Station. Served by a new Metro station just five minutes from the CBD, it will become one of the most populous suburbs in the Inner West and one of Sydney’s premier cultural destinations.

An early works program is taking shape, which&nbsp;includes the first stages of an international design competition.&nbsp;

The aim of the Bays West&nbsp;International&nbsp;Design Competition is to&nbsp;ensure design excellence is embedded in the project from the start. The competition will deliver an&nbsp;urban framework that defines the character, ambition and long-term identity of&nbsp;this&nbsp;former industrial precinct as it transitions to a vibrant, inclusive and sustainable residential&nbsp;neighbourhood.

The competition will be led by the Bays West Delivery Authority in partnership with Government Architect NSW.&nbsp;

It will launch with an invitation for a global Expressions of Interest, before moving to an invitation-only stage that will be assessed by a panel that&nbsp;will provide advice to Cabinet who will select a winner.

Premier of NSW, Chris Minns said the establishment of the new Authority is the first step in transforming the Bays West precinct into a vibrant, livable suburb minutes from the Sydney CBD and two stops from Hunter St Station on the Metro West line.

“The Authority will deliver well-located homes close to the heart of the city and integrate the new precinct with Blackwattle Bay and the new Sydney Fish Market.

“This is a generational opportunity to build a new suburb on the city’s edge and open the harbour foreshore to the public for the first time in a century.”&nbsp;

Minister for Lands and Property Steve Kamper said the new Bays West Delivery Authority established by the Minns Government will turbocharge the development of Sydney’s newest suburb.

“The Authority is working at a record pace to deliver an international design competition, planning pathways and a financial model so that this development benefits Sydney with well-designed homes in a central location, close to public transport, jobs, entertainment and essential services.

“If we want Sydney to stay liveable and affordable, we need to be bold about using underutilised government-owned land to deliver homes for the future while making sure essential working harbour functions can be accommodated.”

Bays West Delivery Authority established to "turbocharge" Sydney’s newest suburb

Around 400 additional homes could be built at Southwark Grounds on Port Road, lifting total site capacity from 1300 to around 1700 dwellings.

A recently approved code amendment would allow apartment towers of up to 14 storeys in some areas of Renewal SA’s redevelopment of the former West End Brewery.

Renewal SA Acting Chief Executive Shane Wingard said he welcomed the code amendment, with the increase in heights and homes making a positive impact on the supply of high-quality, well-connected housing close to the city.

“By going higher across some parts of Southwark Grounds, we are adding a substantial number of very well-located homes with little impact on project delivery time or planned open space,” Mr Wingard said.

Since the project officially launched in 2025, Mr Wingard said more than 12,000 enquiries had been received about living at Southwark Grounds.

“The very strong early interest we’ve seen since homes were first released in the precinct reinforces our plans to create more housing opportunities,” he said.

The Southwark Grounds code amendment was launched in December last year, with community engagement undertaken over five weeks from January.

It proposed increasing maximum building heights from eight to 14 storeys on the eastern section of Southwark Grounds, and to 12 storeys across the remainder of the site, with minimum building heights ranging from two to four storeys.

The code amendment was implemented through an Early Commencement policy in late January, allowing developers to quickly explore the viability of increased height and housing yield while other planning processes continue.

One of the first developers delivering apartment sites have already finalised redesigns to increase the number of apartments following the code amendment.

Samaras’ development adjacent to the future Colonel Light Park is now planning to deliver 125 apartments across 11 storeys, significantly greater than original plans of around 50 apartments across four storeys.

The developer is also exploring the potential for additional affordable housing outcomes.

Most of the apartments at Southwark Grounds will be delivered within a master-planned precinct on a large parcel of land on the eastern portion of the site, covering around two-thirds of its 8.4 hectares.

Wingard said detailed precinct planning over the coming months may identify further opportunities to increase yield further that could see total apartment numbers at Southwark Grounds, exceed this number.

Affordable homes at Southwark Grounds will also see a net increase, with Renewal SA maintaining its commitment to a minimum of 20 per cent affordable housing across the development.

&nbsp;

&nbsp;

Civil works have begun across the site, with construction under way on the first new roads surrounding a townhouse precinct in the south‑west corner of Southwark Grounds. This includes Renewal SA’s 17 Founder’s Row homes, which are on track for completion by Christmas.

“We expect to have people living at Southwark Grounds by the end of the year, so delivering roads and public spaces for those residents is among our highest priorities.”

Construction of 40 townhouses off Anderson Street, known as West Village and being delivered by Contour, is forecast to begin in mid‑2026. Kolabb’s Anderson Lane development will follow shortly after, delivering a further 26 townhouses.

Southwark Grounds is a state government‑led urban renewal project now set to deliver around 1,700 homes over the next decade.

Homes will be supported by a supermarket, a range of retail and hospitality offerings anchored by a revitalised Walkerville Brew Tower, a childcare centre, car parking and well‑connected public spaces.

400 new homes planned for Adelaide's former West End Brewery site

Brisbane developer&nbsp;<a href="https://www.apartments.com.au/developers/cavcorp">Cavcorp</a> has lodged plans for a new mixed-use residential development at <a href="https://www.apartments.com.au/new-apartments/55-wyandra-street-teneriffe-qld-4005">55 Wyandra Street</a>, Teneriffe, anchored by an 85-metre public laneway designed to reconnect the suburb’s riverfront with the Gasworks precinct.

The buildings, known as Teneriffe House and Teneriffe Lane, would replace the existing Queensland Cotton head office site with a 15-storey residential tower transitioning to eight storeys toward Helen Street. The project has been designed by Plazibat Architects and lodged as a code assessable development application for 93 apartments across a 3,401 sqm mixed-use site within the Newstead and Teneriffe Waterfront neighbourhood plan.

Central to the scheme is the transformation of an existing service easement into a publicly accessible cross-block connection linking Wyandra and Helen Streets. Cavcorp says the new laneway will act as both a pedestrian shortcut and a landscaped civic space between the Teneriffe Riverwalk, ferry terminal, and Gasworks precinct.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="26e7f058-b065-4de8-b13d-a2b8cb64dfcc" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/bldg.png?VersionId=sELS0ZKYi361oYipUa1BIKfe_.DLZoFV" />

“The revised proposal delivers a legacy public-realm cross-block link, permanently secured for community use, transforming an existing private easement into a safe, high-quality pedestrian connection between the Teneriffe heritage riverwalk and the Gasworks–Long Island precinct,” the planning report states.

The laneway will sit beneath a large subtropical loggia integrated into the podium levels of the development. The design incorporates deep landscaping, water gardens, lobby spaces, business lounges, and ground-floor apartments to create what Cavcorp describes as a climate-responsive “urban verandah.”

The tower itself has been designed as a slender form with recessed floorplates and curved translucent corners inspired by contemporary Japanese architecture. The building height aligns with the Commercial Road precinct controls, which permit towers up to 15 storeys within proximity to Longland Street.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="a8a17d40-43b6-4718-b3fd-67676fcbb485" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/pers%202_1.png?VersionId=i3VwDtp5AmL_8InW7w4qRbDFEpb744Jt" />

The project will comprise a mix of larger-format apartments aimed at owner-occupiers, downsizers, and families. The proposed apartment mix includes 11 loggia apartments across the lower levels, 50 four-bedroom Sky-Terrace apartments from levels three to seven, and 32 Sky-Pool Homes occupying the upper tower levels. The Sky-Pool Homes will feature private thermal plunge pools integrated into oversized balconies.

According to the application, the apartments are intended to reinterpret the scale and character of Teneriffe’s woolstore conversions and Queensland homes within a vertical residential format.

“The sky-pool homes build on Cavcorp’s previous projects and introduce a distinct apartment typology to Teneriffe, informed by both local and international precedent and responding to an identified market demand for enhanced safety, space and amenity,” the planning submission notes.

A major focus of the proposal is its five-level wellness and lifestyle offering, extending from the basement through to the rooftop.

Amenities proposed include a rooftop Swim &amp; Racquet Club with a 25-metre Olympic lap pool and tennis court, coworking spaces and libraries, golf simulators, wine storage, concierge facilities, business lounges, pet wash areas, and rooftop longevity-focused wellness spaces with spas, outdoor fitness zones, and landscaped terraces.

<img alt="First Look: Cavcorp unveils Teneriffe House and Teneriffe Lane plans for landmark wellness tower in Teneriffe" data-entity-type="file" data-entity-uuid="944b352c-49b9-4247-a4c6-5967b4b69fda" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/amenity.png?VersionId=Ed_qKjAtMwFT.5gfl3jiA9QwdWxSMsaX" />

All parking will be concealed within basement levels accessed from Wyandra and Helen Streets. Cavcorp says the deep-basement engineering approach allows the entire ground plane to prioritise landscaping, pedestrian movement, and active frontage rather than vehicle infrastructure.

The development continues Cavcorp’s concentration in Newstead and Teneriffe, where the Brisbane developer has delivered a number of apartment projects including Lucent, Le Bain, and Luminare, as well as the Long Island Wellness Precinct nearby. Several of those projects have received national design and architecture awards, including recognition under Brisbane’s “Buildings that Breathe” program.

Cavcorp unveils wellness-focused Teneriffe House and Teneriffe Lane apartment buildings

Focus Group Investments has lodged plans for a new apartment development at <a href="https://www.apartments.com.au/new-apartments/64-70-hanover-street-fitzroy-vic-3065">64–70 Hanover Street</a> in Fitzroy, seeking to utilise the Victorian Government’s recently introduced Great Design Fast Track pathway to accelerate approvals for the project.

The proposal is among the latest developments to emerge through the state-led initiative, which was established to fast-track well-designed residential projects in activity centres and transport-connected inner-city locations. The pathway allows qualifying developments that meet elevated design and housing benchmarks to bypass traditional council planning timeframes and instead be assessed directly by the Department of Transport and Planning.

Designed by SJB, the development will comprise a mix of apartments above activated lower levels, with a strong focus on architectural articulation, landscaping, and communal amenity. The design response seeks to balance the industrial character of Richmond’s former warehouse precincts with a more contemporary residential form.

<img alt="First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Richmond apartments" data-entity-type="file" data-entity-uuid="abea51cc-d85b-479e-9aef-a589f3b37ca7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/ground.png?VersionId=e1Kf8EyPWwyiVumtqQ4rM5S4GpOR3CCz" />

Proposed are 63 new dwellings, a wide ranging mix of studio, one-, two-, and three-bedroom apartments, and townhouses and duplexes. They will be spread across a part-three, part-eight storey building.

The Planning and Urban Context Report by Tract says the development is of an "exemplary architectural standard" and has been carefully crafted by SJB Architects.

"Dwellings&nbsp;will benefit from excellent access to natural light, cross-ventilation opportunities and extensive communal space," the report noted.

The architectural material highlights the project’s integration of landscaped elements and communal spaces throughout the building. The proposal also incorporates sustainability initiatives aligned with the Victorian Government’s push for higher-performing apartment developments under the fast-track program.

The Great Design Fast Track was unveiled by the Victorian Government in 2024 as part of a broader housing supply strategy aimed at accelerating the delivery of new homes. Projects assessed through the pathway must demonstrate high-quality architecture, sustainability outcomes, and housing diversity while being located close to public transport and existing infrastructure.

<img alt="First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Richmond apartments" data-entity-type="file" data-entity-uuid="afdbe834-8dc4-4a77-a943-ba07bc927348" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/site_11.png?VersionId=0J657j.TaChAZfp93wqJYBTqSsnREJx2" />

Focus Group, founder and led by Paul De Lutiis, is increasingly active across Melbourne’s inner suburbs, targeting well-connected urban renewal locations suited to medium and higher-density residential development. The Fitzroy proposal continues that strategy, leveraging the area’s strong transport links, established retail amenity, and proximity to the CBD.

Fitzroy has been one of the most popular spots for developers and buyers in recent years. The likes of PACE Development Group, SMA Projects, Crema Group and Chapter Group, currently selling projects in the suburb.

First look: Focus Group Investments taps Victoria’s Great Design Fast Track for Fitzroy apartments

National Australia Bank (NAB) has brought forward the timing of the first RBA cash rate cut by three months.

NAB is now expecting a cut in February, in line with ANZ and Westpac, having initially thought a cut wouldn't come until May.

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB changed its call following the August monthly inflation figures that were released at the end of September, showing it had dropped to 2.7 per cent.

"The risk has been skewed to a first cut earlier in 2025, and today’s change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected," NAB noted in its latest update.

They added that the cadence of the cuts may be faster than its central profile.

"Domestic inflation pressures are cooling, but only gradually, and we continue to expect the conditions for a cut will not be in place this year.

NAB believes the easing cycle will end at 3.1 per cent by early 2026, which is five cuts from the current 4.35 per cent cash rate.&nbsp;

CBA also thinks 3.1 per cent will mark the end of the cutting cycle, while Westpac is forecasting 3.35 per cent, and ANZ is the most pessimistic at 3.6 per cent, which would be just three interest rate cuts.

<h2>What would a rate cut in February look like for borrowers?</h2>

According to&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2vK2ujS77CHs9VRvSSXzLC" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.IVvjJ-2BPT0A8C3VxtqKc6e3bj5hBuw27WFEYqovsYs7kPsgFulYrdOzeP8gI7CybJOya3_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20hPXdLlPP9yD7DvFFDBM5yrTqxvcCiMfAsW1onD-2FcriL628eYdhNQE7bwzYrxcOYnmaYfRhGl-2FEHQ6eK2uQcLxs6Cbu6Dx0bYvpi5A6enmxMWU5TkcRYrP6Z8GbXZYtc5qSoKu6eWFBQR9K7fsjXwHMmby3D3X6Yx-2BxcDcdRruTG" target="_blank">Canstar</a>, if there is a cut in February, a borrower with a $600,000 loan today and 25 years remaining would see their monthly repayments drop by $92.&nbsp;

<table border="1" cellpadding="0" cellspacing="0">
	<tbody>
		<tr>
			<td colspan="3">
			Impact of 0.25% pt cut in February 2025
			</td>
		</tr>
		<tr>
			<td>
			Current loan size
			</td>
			<td>
			Drop in monthly repayment
			</td>
			<td>
			New monthly repayment
			</td>
		</tr>
		<tr>
			<td>
			$600,000
			</td>
			<td>
			-$92
			</td>
			<td>
			$3,907
			</td>
		</tr>
		<tr>
			<td>
			$750,000
			</td>
			<td>
			-$114
			</td>
			<td>
			$4,884
			</td>
		</tr>
		<tr>
			<td>
			$1M
			</td>
			<td>
			-$153
			</td>
			<td>
			$6,512
			</td>
		</tr>
		<tr>
			<td colspan="3">
			Source:&nbsp;<a data-saferedirecturl="https://www.google.com/url?q=https://link.mediaoutreach.meltwater.com/ls/click?upn%3Du001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL&amp;source=gmail&amp;ust=1727774368149000&amp;usg=AOvVaw2qVnp6oqATgqDUi2Frm22q" href="https://link.mediaoutreach.meltwater.com/ls/click?upn=u001.xWMOP9hChsvn-2BC9O-2FebBihXIZ4cEzbiuENdxm-2Bx3-2FYEEgYMhZlKWNj5Zzy1YZ56RuASD_RgrM7qq-2BfK-2FtAHeRBLv5Qrb-2Bii5fzjLeKcP4w-2FkNgJPXygpiRhVUan3WV3QEggcf617UC8Z60RjQJZAqx7PiO7FtVJQSn0D46Zc3iTVP0kAhTTzG51cPpa5hrqz1OkSA-2BiXAxUajQ686MTtiseWBIdMdknd83aB7cOVgXlVTeHCGf3-2BcMHwfvI8TYlkUovqEhn4dj0KXf2eJGpb9-2BBv20v2akwr6-2BqLyRrlEgkJ4J-2BCCyY0x189xEHZA4Ylf8c7ChBqNIkhmftZzoFuZKFn43pw3oJVg2o1gumrpdA-2B7MB-2FBtmL2rFCI-2FXORATQHySCLVOMg7Vywv-2BqnnQUAtDz6XkvpwxdHFXh70VwKazzhJsICilEYOvP4ju0sIfi5g6TL" target="_blank">www.canstar.com.au</a>. Starting rate is the RBA existing average owner-occupier variable rate of 6.36%. Assumes banks pass the cash rate cut on in full the month after the meeting.
			</td>
		</tr>
	</tbody>
</table>

Canstar Data Insights Director, Sally Tindall, says if core inflation continues to track in the right direction, or unemployment starts to accelerate significantly, we could well see a cash rate cut as early as February of next year.

“All four big banks now believe the RBA will be ready to cut the cash rate in just over four months’ time, if not before, in the case of CBA.

“However, the outlook for both inflation and unemployment is still highly uncertain. A couple of wobbly sets of inflation data could see the RBA holding for longer, particularly if unemployment remains relatively steady."

&nbsp;

Commonwealth Bank, the nation's largest lender, still thinks the first cut will come in December.

NAB bring forward first RBA cut to February 2025

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Investors and owner-occupiers may now be able to borrow at loan-to-value (LVRS) ratios as high as 95%, according to Ray White deputy chairman Sam White.
Banks were only willing to lend up to 90% of the value of the property last year, but this has now risen to 95%, says White, who is also the executive chairman of Ray White’s mortgage broking arm Loan Market.
However, the catch is that property valuers continue to be conservative, meaning a 95% loan could actually be under 90% of the agreed purchase price if the bank receives a lower valuation.
Banks lend based on the independent valuation they receive of the property – not the agreed purchase price – meaning borrowers must make up the shortfall themselves.
Overall, though White says Loan Market brokers are seeing “more aggressive lending”, with lenders also reviewing their serviceability criteria.
A similar phenomenon was noted by mortgage broker Smartline, which said banks were now willing to look at secondary incomes when considering loan applications
White says some lenders will consider rental payments as well as irregular income, such as bonus payments and commissions.
“We can place clients with a strong rental history,” White told The Australian Financial Review.
Furthermore he says fixed interest rates remain attractive, while variable mortgage rates are set to fall with more RBA rate cuts expected.
Find out why buying an investment property as your first purchase could be the easiest and cheapest way to get your foot on the property ladder by signing up for tomorrow’s free Property Observer webinar with Michael Matusik: Tips for buying your first property as an investment. The webinar will take place on Tuesday, June 5 at 12.30pm.
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lschlesinger-FZcF9M3vE6

Banks relaxing LVRs and serviceability criteria but valuations still conservative: Sam White

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How low could the RBA’s cash rate go? Much lower than most folks, including the financial markets, think. The global economy is schizophrenic right now. On an underlying basis, there are powerful forces shifting the centre of economic gravity away from the old world of North America and Europe towards the 2.6 billion people living in China and India.  The IMF estimates that over the next five years the eurozone will only contribute 7.7% of total global growth. In contrast, China is expected to account for around three times that amount, or 22.6%, of the world’s total expansion. The same pattern applies when one compares the major advanced economies – or the so-called “G7” – with their emerging and developing counterparts. Notwithstanding the media and financial market fixation with the G7, these nations only made up one-third of global growth between 2000 and 2011. The IMF believes that this share will fall further to just 28.6% between 2012 and 2016. By way of comparison, developing countries accounted for 49% of global growth over the last decade, with their contribution forecast to rise to more than 60% over the next five years.  While the industrialisation, urbanisation and rising middle classes of Chindia are driving "decoupling" from the North Atlantic nations, the unprecedented global interconnectedness brought about by the internet and digital communications is pulling us in the opposite direction. The 24-hour, real-time, and often sensationalist news cycle, with its bias towards the information-rich open societies in the G7, seems to be propagating even greater global synchronisation in financial market behaviour and real economic cycles.  Nothing highlights this better than the disconnect between Australia’s raw economic data and its contemporaneous financial market signals.  In May, Australia’s unemployment rate fell from 5.2% to 4.9%, blind-siding most analysts. Business investment in the first quarter also smashed consensus expectations, while plans for capital spending over the next few years were much better than pessimists anticipated. Wages and overall consumer spending are also tracking around their long-term historical trends. Finally, housing credit and, increasingly, business credit are expanding broadly in line with purchasing power.  Yet financial markets, and many asset prices, are projecting on to this ostensibly healthy picture a seemingly cataclysmic outcome. In particular, the interest rates required on Australian government bonds have plummeted to all-time historical lows. On Friday night the yield on three-year Australian government bond futures fell to below 2% for the first time ever.  This is ordinarily a very worrying portent: three-year government bond yields are now more than 175 basis points below the current RBA cash rate (technically called an "inversion" of the yield curve). That is, the market thinks the RBA will cut its official target cash rate to levels we’ve never seen before. Specifically, the futures market is now suggesting that the RBA’s cash rate will drop to as low as 2.15% by the end of this year. That’s more than six standard RBA rate cuts.  All commentators, economists, and policymakers have struggled to keep pace with this extreme global uncertainty. In June last year bank economists, including Westpac and yours truly, were forecasting further RBA rate hikes. In that month Westpac’s Bill Evans presciently swivelled 180 degrees and called for a 100 basis point reduction in the cash rate by the end of 2012. Bill got the direction right, but has now been compelled by evolving circumstances to dramatically adjust his view again; he's added four more RBA rate cuts, or 100 basis points worth in total, to his original 2012 expectation.  Last week the RBA was believed to be resistant to cutting rates in June. That’s understandable given the staff only recommended a 25 basis point cut in May and were pushed by the board to double it. Since May, the RBA has seen the currency depreciate substantially – it is now about 13% below its all-time US dollar highs – the jobless rate decline, and capital spending exceed expectations. But dismal data from overseas is now likely to force the RBA to follow May with more rate relief tomorrow.  Economists at NAB, Westpac, CBA, JP Morgan, and Market Economics, among others, have at various points changed their June calls from no move to a cut on Tuesday. Senior commentators, such as Terry McCrann on Friday night, and David Bassanese last week, both argued the central bank would exercise the option to wait in June.  But McCrann, on Sunday, and Bassanese, in today’s paper, have embraced a cut. Bassanese puts it best: “To my mind, the facts have changed. As a result, my previous base-case view that the RBA would not cut interest rates again this month also needs to change.”  The situation in Europe is telescoping towards a binary outcome: either we get fiscal integration, which will, rather ambitiously, involve regional deposit guarantees, individual nations ceding authority over budget spending, and so-called “euro-bonds” that allow countries to raise money backed by the commitment of the entire eurozone, or the currency union as we know it today will slowly disintegrate.  While each contingency has different ramifications for the Australian economy and the response of local policymakers, it is instructive to consider what might actually happen in a downside scenario. In the GFC, the RBA's cash rate dropped to 3%, which combined with the boost to the first-home owners’ grant helped house prices surge 13% in 2009. The cash rate is currently only 75 basis points higher at 3.75%. Of course, actual lending rates are much more important than the RBA's theoretical target. And they are, crucially, 125 basis points above the lows touched in April 2009.  If – and it is an almighty "if" – the global economy does indeed lurch into recession, I think the RBA will slash its official cash rate way below the levels seen in 2008 and 2009. In fact, I am thinking 1.9% or less.  Take home loan rates as a benchmark. After the double cut in May, the current discounted home loan rate in Australia is about 6.35%. The trough achieved during the last crisis was 5.1% in April 2009. At surface level, the RBA would need to slash its cash rate 125 basis points to 2.5% to get lending rates back to their crisis marks.  But the rub is that this supposes a 1:1 pass-through by the banks. In a best-case scenario, the RBA will only assume two-thirds pass-through. That means to get 125 basis points of lending rate reductions the RBA will have to cut its cash rate by an extra 65 basis points (or about 190 basis points in total). In turn, this implies a terminal cash rate of 1.9%. That might just get you a 5.1% mortgage rate.  There is, however, a second wrinkle, which was highlighted to me by a UBS strategist during a chat on Friday. Recall that a lot of bank funding comes from retail deposits that are transaction accounts. These deposits already earn zero per cent interest rates – it is tough (although not impossible, as the Swiss have proven) to shove them lower. Accordingly, the banks may pass on less and less to maintain their net interest margins. The lower pass-through would also be amplified by a blow-out in credit spreads, which would further elevate bank funding costs in the absence of taxpayer guarantees.  If you are seriously bearish on global growth prospects, as many claim, and think that the eurozone crisis is going to push the world into recession, then you should prepare yourself for a very low RBA cash rate. Forget Westpac’s 2.75%, or the 2.15% currently pencilled in by the financial markets.  Based on the analysis above, the RBA cash rate is going to have to fall to less than 1.9% merely to replicate the lending rate lows achieved in 2009. A final argument in favour of an ultra-low RBA cash rate is the fact that this time around fiscal policy will be hamstrung by concerns about a diminution in Australia’s prized AAA credit rating. Given the sharp increase in Australian government debt since 2007, it will be much more difficult for the Commonwealth to repeat its last cash splash. So most of the responsibility for supporting the local economy will fall on to Martin Place’s narrow shoulders. As the May meeting demonstrated, nobody, including the RBA governor and his staff, can know with confidence what exact decisions the RBA's board will coalesce around at 12.30pm tomorrow, or in the ensuing months. The only constant we can rely on is that heightened global uncertainty will persist for some time. And, as during the last crisis, cash will be king.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm" target="_blank">Yellow Brick Road Funds Management</a> and Rismark. The author may have an economic interest in any of the items discussed in this article. These are the author’s personal views and do not represent the opinions of any other individual or institution. This material is not intended to provide, and should not be relied upon for, investment advice or recommendations.
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chrisjoye-JYhJsTrNRC

RBA cash rate could go below 1.9%, with 5.1% mortgage rate possible: Christopher Joye

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The Reserve Bank board meets next on June 5. We expect that the board will decide to further reduce the overnight cash rate from 3.75% to 3.5%.
We now expect that the low point in this easing cycle will be 2.75% rather than 3.25%, which had previously been our expectation. We expect further cuts in July and August to be followed by a final cut in the fourth quarter.
We do not favour the 50bp cut scenario in June. The decision to cut by 50bps in May was mainly driven by direct concerns around the domestic economy. To us, there appeared to be an element of catch up with the bank holding steady in February–April when the domestic case for a cut was strong. The decision will be built around the impact that the deterioration in global confidence will have on the Australian economy. Since the board meeting in May, US 10-year bond rates are down from 1.9% to 1.6% and the Australian equivalent is down from 3.6% to 2.9%. However, there are a number of key risk events over the next few weeks (Greek elections on June 17, for example) which will be critical for global confidence. We expect a more orderly approach to addressing these issues and thus a more “considered” 25bps move. However, nobody can be particularly confident in gauging the bank's meeting-by-meeting strategy for dealing with these issues.
This is a change in our previous forecast position. We had been expecting that the board would decide to hold rates steady in June, with two further moves expected in both July and August of 25bps each. We now expect that the low point in this easing cycle will be 2.75% rather than 3.25.
These two extra cuts are based on our assessment that the global environment – read Europe – has deteriorated even further since we revised down our call for the low point from 3.75% to 3.25%. In turn, this deterioration is expected to have a more severe impact on confidence in Australia than had earlier been expected.
The stance of policy is currently only mildly expansionary despite the official cash rate being at 3.75%, its lowest level outside the global financial crisis.
We gauge that it is only mildly expansionary because the stance of policy should be assessed in the context of private sector interest rates. With the gap between the Standard Variable Mortgage Rate (SVMR) and the official cash rate now being 140bps wider than in 2007, we assess that the neutral rate has fallen from 5.5% in 2007 to 4.1%. That puts the official cash rate only 0.45% below neutral today – certainly only mildly accommodative.
Another way of assessing this stance is to compare the SVMR with its long-term average. The long-term average SVMR is 7.5%, so the current SVMR, at 7.05%, is also only 0.45% below the average.
A move to 2.75% in the official cash rate is likely to see the rate somewhere between 100bps and 145bps below neutral, depending on the movement in private sector rates in response to the fall in the official cash rate. If there was a full 100bp reduction in private rates then the official cash rate would bottom out 145bps below neutral.
If the reduction in private rates was along the lines of the reduction following the rate cut in May then the official cash rate would bottom out 115bps below neutral. The same logic would mean a SVMR of between 6.05% and 6.5%.
In the three previous easing cycles the official cash rate has bottomed out at 150bps (2008/09); 125bps (2001) and 50bps (1996-97) below neutral.
In those periods the SVMR bottomed out at 5.8% (2009); 6.05% (2001); and 6.7% (1997).
The contrast with 2009 is important. Despite the cash rate falling below its GFC trough, we expect the SVMR will bottom out well above the 2009 level.
In the more recent two periods above, the final rate cut in the cycle coincided with an increase in the unemployment rate of one to two percentage points over the preceding year: 6% to 7% in 2001 and 4% to 5.9% in 2008-09. In 1996-97 the increase in the unemployment rate was only around 0.5ppts, as this was a mid-cycle slowdown rather than a fully- fledged slowdown.
The contrast with those earlier periods the implied stance of policy should also take into account the level of the Australian dollar. In 1997 the AUD/USD was around 68 cents; in 2001 around 50 cents and in 2009 around 70 cents. Clearly the AUD was providing a much more complementary stimulatory support for the economy than in current circumstances where, despite recent weakness, it is still around 98 cents.
 
<hr class="system-pagebreak">
The labour market comparison argues that current market pricing is somewhat excessive. Market pricing implies that rates will eventually fall by 140bps (just above 2.25%) which implies a range 125bps to 175bps range below neutral.
Because market expectations are still significantly more aggressive than even this revised view, we still expect fixed rates to increase should our forecasts prove correct. For example, with markets giving a significant probability to a 50bp cut this week we would expect fixed rates to increase modestly if we are correct and "only" a 25bp move is delivered.
Market pricing is reflecting extreme uncertainty, and it is distorted by hedging activity by offshore investors who are not taking a pure position on Australian monetary policy, and it is therefore highly volatile. The uncertainty emanates from:
<ul>
<li>The European outlook, highlighted by the risk of Greece withdrawing from the Euro and excessive instability in the Spanish banking/sovereign nexus.</li>
<li>The state of the Chinese economy and prospects for counter cyclical policies to be a) enacted and b) to gain traction.</li>
<li>Prospects for the US economy where the recovery seems to be losing momentum</li>
<li>The impact on private sector rates in Australia of official rate cuts and the spillover to confidence.</li>
<li>The state of the labour market in Australia following the surprise fall in the unemployment rate from 5.2% to 4.9%.</li>
<li>Prospects for the interest rate sensitive parts of the Australian economy – housing and consumer expenditure and the investment and employment decisions of those firms that service those sectors.</li>
</ul>
Our forecasts are based around a general outlook that while Greece is unlikely to leave the euro the European "scene" will be marked by rolling crises and bailout packages against a back drop of protracted recession in the region. That would avoid the "worst case" scenario that might be partly priced in by the market but would ensure an ongoing drag on confidence, both consumer and business, in this country.
Recent news from Europe has reinforced our concerns for the region, particularly for Greece and Spain. For Greece, the June 17 election looms as a crucial event. The most recent polls point to far-left party Syriza being in the ascendency; if this poll proves correct, then a tense stand-off between the new government and the Troika is almost assured. The eventual outcome is highly uncertain although our base case leaves Greece in the euro.
Spain’s financial ill-health has also rapidly come back to the fore over the past month, primarily due to the need to fully nationalise banking conglomerate Bankia, formed in 2010 through the union of seven stressed regional banks. The €19 billion price tag for the nationalisation is troublesome given the Spanish sovereign’s urgent need for austerity and difficulty in accessing cost-effective capital. However, the reported €180 billion of bad loans (industry estimates) for the system as a whole, combined with the enfeebled financial position of Spain’s regional governments, make a positive outcome increasingly improbable. The need for a support package for Spain would be a serious test for the financial and political capital of the region. Our concerns about the impact of these issues on confidence in Australia have increased in recent weeks.
Recent information out of China has been in accord with our long-held views that the cyclical downturn of the first half of this year will be progressively relieved by policy accommodation. That will see a recovery underway later this year, which will get 2013 started on the front foot. Our forecast for 2012 remains at 7.8% and our 2013 forecast remains 8.7%. A weaker than expected export profile, driven by European problems, would lower near-term growth, but would strengthen the policy response in the second half, which would help the 2013 numbers. We note that the RBA's approach to the Chinese slowdown has been to attribute it to policy choices which can be reversed if needs be. Thus we might expect that the board will have been heartened by the recent move towards growth support in China. That adds up to a position whereby China is a neutral for the policy outlook detailed here.
The US economy is likely to lose further momentum through the Northern spring and into summer. Deteriorating job and domestic demand growth are expected to result in another round of quantitative easing. Further weakness in equity and/or house prices would give further justification for action. As evidenced from the April FOMC meeting minutes, so too would a deterioration in Europe and/or concerns over the potential impact on activity of the 2013 ‘fiscal cliff ’.
Overall, we continue to expect global growth of "only" 2.8% in 2012, compared with official estimates of 3.5%. We expect that recent developments in Europe will prompt a downward revision to official estimates moving towards our own view.
While off shore issues are likely to dominate the board's explanation behind its decision to cut rates this week there is also a domestic case for lower rates. We were surprised by the insipid 0.8% increase in the Westpac Melbourne Institute index of consumer sentiment in May, despite a 35bp cut in mortgage rates – the biggest cut since February 2009. We are wary of the recent fall in the unemployment rate noting the unusual circumstances of a rise in jobs and a fall in the labour force. We note that Treasury is forecasting the unemployment rate to reach 5.5% by mid-2013, with, presumably, a higher rate earlier in the year. We also point to the Westpac Melbourne Institute index of unemployment expectations which has "job insecurity" on a par with 2001. While the headline unemployment rate looks solid the underlying story around the labour market is perplexing.
In the year to April total employment has lifted by 87.3k jobs. However, 71.7k were part-time jobs and 57.3k were female. So the employment growth this year has been concentrated in part-time and/or females jobs. It is also worthwhile noting that to date, WA is still the centre of growth for employment having added 35.7k to its workforce this year.
 
<hr class="system-pagebreak">
 
Now this is a far from a spectacular number (just 21k per month) and the fall in the unemployment rate has been driven by the fall in participation rate. If the participation rate had held constant since September last year, the unemployment rate would have peaked at 5.75% in Feb 2012 and even in April, following a run of better jobs numbers, the unemployment rate would still be 5.5%. Overall we are not inclined to alter our forecast that the unemployment rate will exceed 5.5% by year's end.
Recent data prints are also uninspiring. Retail sales for April (down 0.2%); spending on renovations and additions (down 4.7% in the March quarter) and residential building (down 1.9%) and dwelling approvals (weak even abstracting for the WA element) have all been weak despite the rate cuts in November and December. While investment plans in mining from the Capex survey for 2012-13 remain strong we estimate that both manufacturing and services investment are expected to decline in 2012-13.
On house prices, the RP Data series (apparently favoured by the RBA, and also our favourite measure) estimates that house prices have continued to fall in 2012, despite the rate cuts, being down by 0.8% in to April, with high frequency prints showing that prices fell further in May.
We expect there will also be adequate scope from inflation to further lower rates. With growth pressures mainly in the mining sector where the "escape" valve of imports can be used to contain inflation pressures and with those industries being affected by the high AUD and the deleveraging of the household sector needing to raise productivity, the inflation outlook is particularly encouraging. We expect another respectable productivity and unit labour costs outcome in the March quarter national accounts, due the day after the RBA meets in June. In its May statement on monetary policy the RBA forecast that inflation will remain near the bottom of the 2–3% band over the next year.
We have always expected rates to bottom out in the second half of 2012, with rates on hold for most of 2013.
That was not the case in 2009 when rates got to a more stimulatory level than we expect this time and fiscal policy both domestically and offshore was providing a huge complementary boost. In particular, the government's boost to housing with the First Home Owners Grant was very important.
However, as we progress through 2013, the interest rate debate will shift from anticipating additional rate cuts to the timing of the next RBA tightening cycle. On this, we make two key points.
The rate outlook for 2013 will differ from that during late 2009. On the earlier occasion, the view was that rates needed to be normalised, that borrowing rates needed to be returned to around average levels, in an orderly fashion. We assess that the stance of policy needs to remain on the expansionary side throughout next year. Notably, the global economy will remain fragile and vulnerable to shocks, even if the headline growth numbers return to around trend, as we anticipate. Domestically, the consumer is in a deleveraging phase, which means the housing sector needs more supportive settings. Moreover, the Australian economy is in a transition phase, with the relatively high dollar driving significant structural change. The tightening of monetary conditions associated with the high dollar needs to be taken into consideration.
Equally, it would be inappropriate for the Australian economy, which is on the right side of the shift in global growth to the Asian region, to leave interest rates around historic lows for a prolonged period. As the significant confidence drag from Europe begins to fade, but not disappear (markets become more comfortable with the likely adjustment process in Europe), rates will need to move off their lows. We envisage that the RBA will need to begin raising the cash rate during the second half of 2013. This would have the cash rate at 3% on our forecasts by year's end.
Outlook for the Australian dollar
The AUD has recently reached our base September quarter forecast of 98 cents. At present there are a number of downward pressures operating on the currency – rate differentials, commodity prices, the shift back into trade deficit, weak risk appetite globally, diminished FX reserve accumulation in emerging markets – that will not dissipate in the short term. Therefore we feel that there is more to come in this depreciation phase. We now see a 96 cents rate by end September, with the strong likelihood that it goes lower than that rate in the meantime. In the short-term, we expect the USD index to show considerable strength, the yen's safe haven status to shine through as Japanese investors exhibit strong home bias in a low yield world, while the euro will understandably find few adherents. Asian currencies will also remain under pressure for the moment.
We do however retain the view that AUD/USD will be back above parity by year's end, in line with a pullback in the USD index. That call is largely predicated on an expected series of stimulus policies in Europe; China; and the US that will gain traction, particularly through the December quarter,. The combined effects of the more accommodative global policy environment will reverse the negative dynamics current swirling around the AUD (and other growth assets, like Asian currencies and commodity prices). We see the currency reaching $1.02 by the end of the year and moving even higher in early 2013, before levelling out at mid-year in the $1.05–$1.06 area.
Bill Evans is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
This article originally appeared on <a href="https://www.businessspectator.com.au/" target="_blank">Business Spectator.</a>
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Interest rates to fall to a low point of 2.75% by the end of this year: Westpac’s Bill Evans

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The Macquarie Group has made a big push into the property investor space in 2012, growing its investment mortgages book by 33% during the first four months of the year, according to Property Observer analysis of APRA figures.
The investment bank has written $290 million worth of investment housing loans since January 1 – just behind regional players Bendigo Bank ($309 million), Bank of Queensland ($310 million) and Suncorp ($384 million).
A spokesperson for Macquarie told Property Observer the increase in its investment housing lending  was likely due "to the business continuing to ramp up since returning to the [mortgage] market in 2010.
“We have been continuously broadening our distribution and working on various product developments like the SMSF property loan.
“Our book has also recently returned to growth following a period of run-off – the run-off was of course driven by our time out of new mortgage origination between 2008 and 2010,” she says.
Macquarie launched its SMSF Property Loan on May 30 aimed at giving SMSFs direct exposure to residential investment property assets. 
In addition the bank also offers three tailored investment loans, including a 100% investment loan requiring no upfront capital.
Top 15 property investor lenders since start of the year ($ millions)
 
<table style="width: 379px;" border="1" cellpadding="0" cellspacing="0"><tbody>
<tr>
<td nowrap valign="top" width="143">
Bank
</td>
<td nowrap valign="top" width="96">
31-12-11
</td>
<td nowrap valign="top" width="76">
30-04-12
</td>
<td nowrap valign="top" width="64">
New lending
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Westpac
</td>
<td nowrap valign="top" width="96">
$118,380
</td>
<td nowrap valign="top" width="76">
$120,654
</td>
<td nowrap valign="top" width="64">
$2,274
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
ANZ
</td>
<td nowrap valign="top" width="96">
$44,549
</td>
<td nowrap valign="top" width="76">
$46,243
</td>
<td nowrap valign="top" width="64">
$1,694
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Commonwealth Bank
</td>
<td nowrap valign="top" width="96">
$85,928
</td>
<td nowrap valign="top" width="76">
$87,328
</td>
<td nowrap valign="top" width="64">
$1,399
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
NAB
</td>
<td nowrap valign="top" width="96">
$52,134
</td>
<td nowrap valign="top" width="76">
$52,616
</td>
<td nowrap valign="top" width="64">
$482
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Suncorp
</td>
<td nowrap valign="top" width="96">
$8,179
</td>
<td nowrap valign="top" width="76">
$8,563
</td>
<td nowrap valign="top" width="64">
$384
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Bank of Queensland
</td>
<td nowrap valign="top" width="96">
$9,672
</td>
<td nowrap valign="top" width="76">
$9,982
</td>
<td nowrap valign="top" width="64">
$310
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Bendigo and Adelaide Bank
</td>
<td nowrap valign="top" width="96">
$8,553
</td>
<td nowrap valign="top" width="76">
$8,863
</td>
<td nowrap valign="top" width="64">
$309
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Macquarie Bank
</td>
<td nowrap valign="top" width="96">
$876
</td>
<td nowrap valign="top" width="76">
$1,166
</td>
<td nowrap valign="top" width="64">
$290
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Citigroup Pty
</td>
<td nowrap valign="top" width="96">
$2,401
</td>
<td nowrap valign="top" width="76">
$2,547
</td>
<td nowrap valign="top" width="64">
$146
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
BankWest
</td>
<td nowrap valign="top" width="96">
$9,322
</td>
<td nowrap valign="top" width="76">
$9,466
</td>
<td nowrap valign="top" width="64">
$144
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Members Equity Bank
</td>
<td nowrap valign="top" width="96">
$1,168
</td>
<td nowrap valign="top" width="76">
$1,280
</td>
<td nowrap valign="top" width="64">
$112
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
ING Bank
</td>
<td nowrap valign="top" width="96">
$9,469
</td>
<td nowrap valign="top" width="76">
$9,572
</td>
<td nowrap valign="top" width="64">
$103
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
AMP Bank
</td>
<td nowrap valign="top" width="96">
$2,014
</td>
<td nowrap valign="top" width="76">
$2,094
</td>
<td nowrap valign="top" width="64">
$80
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
Heritage Bank
</td>
<td nowrap valign="top" width="96">
$1,187
</td>
<td nowrap valign="top" width="76">
$1,238
</td>
<td nowrap valign="top" width="64">
$52
</td>
</tr>
<tr>
<td nowrap valign="top" width="143">
HSBC Bank Australia
</td>
<td nowrap valign="top" width="96">
$3,843
</td>
<td nowrap valign="top" width="76">
$3,894
</td>
<td nowrap valign="top" width="64">
$51
</td>
</tr>
</tbody></table>
 
Source: APRA
Macquarie CEO Nicholas Moore revealed at a February operational briefing that the bank had launched an enhanced mortgages offering to new Australian clients.
The investment bank also has an equity stake and helped launch mortgage aggregator Vow Financial, which has grown to a network of 700 mortgage brokers – a channel for it to distribute its investment loans and other products.
The APRA figures show that Members Equity Bank has also ramped up its investment mortgage lending since January, lending $112 million to property investors translating into 9% growth for its $1.3 billion investment loan book.
In contrast to Macquarie and ME Bank’s pitch to the investor market, NAB has pulled back from this market, growing its investor mortgage book by less than 1% since the start of the year – adding just $482 million to its $53 billion investment loan book.
Westpac has by far the biggest investment loan book of all lenders at $121 billion and also wrote the highest volume of investment loans ($2.3 billion) over the first fourth months of the year.
ANZ has also been a strong player in the investment space, registering the strongest growth of the Big Four over the fourth months of just under 4%. The bank has written $1.7 billion worth of investment loans since the start of the year.
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Macquarie increases loans to property investors 33% since January: APRA figures

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Non-bank lenders share of the total lending market declined markedly in April as mortgage lending remained at record low annual growth. 
In percentage terms banks have almost 92% of the total lending market and non-banks just 8%. 
A year ago banks had less than 90% of the total lending market while 11 years ago (April 2001) they had less than 80% of the total market. 
Total mortgages advanced by both banks and non-banks increased by just 0.4% in April following a 0.4% increase in March leaving the annual pace of growth at 5.3%, according to the latest RBA financial aggregates. 
Annual mortgage growth has been at 5.3% since January, the lowest growth since 1977, according to RBA records. 
Despite this very slow pace of growth banks share of the total lending market increased by $12 billion from $1.708 trillion to $1.72 trillion, while non-banks’ total lending fell by from $155 billion to $152 billion – the fifth successive month (since December) that their total aggregate lending has fallen. 
Banks vs non-banks lending books (figures in $ billions)
 
<table border="0" cellspacing="0" cellpadding="0" width="320"><tbody>
<tr>
<td width="76" nowrap valign="bottom">
Month
</td>
<td width="57" nowrap valign="bottom">
Banks
</td>
<td width="88" nowrap valign="bottom">
Non-banks
</td>
<td width="99" nowrap valign="bottom">
Total lending
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Apr-2011
</td>
<td width="57" nowrap valign="bottom">
1608.0
</td>
<td width="88" nowrap valign="bottom">
163.5
</td>
<td width="99" nowrap valign="bottom">
1771.5
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
May-2011
</td>
<td width="57" nowrap valign="bottom">
1614.9
</td>
<td width="88" nowrap valign="bottom">
164.5
</td>
<td width="99" nowrap valign="bottom">
1779.5
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Jun-2011
</td>
<td width="57" nowrap valign="bottom">
1622.4
</td>
<td width="88" nowrap valign="bottom">
163.6
</td>
<td width="99" nowrap valign="bottom">
1786.1
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Jul-2011
</td>
<td width="57" nowrap valign="bottom">
1625.6
</td>
<td width="88" nowrap valign="bottom">
163.7
</td>
<td width="99" nowrap valign="bottom">
1789.4
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Aug-2011
</td>
<td width="57" nowrap valign="bottom">
1638.4
</td>
<td width="88" nowrap valign="bottom">
163.0
</td>
<td width="99" nowrap valign="bottom">
1801.4
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Sep-2011
</td>
<td width="57" nowrap valign="bottom">
1649.8
</td>
<td width="88" nowrap valign="bottom">
161.6
</td>
<td width="99" nowrap valign="bottom">
1811.4
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Oct-2011
</td>
<td width="57" nowrap valign="bottom">
1658.9
</td>
<td width="88" nowrap valign="bottom">
161.0
</td>
<td width="99" nowrap valign="bottom">
1819.8
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Nov-2011
</td>
<td width="57" nowrap valign="bottom">
1670.4
</td>
<td width="88" nowrap valign="bottom">
162.1
</td>
<td width="99" nowrap valign="bottom">
1832.5
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Dec-2011
</td>
<td width="57" nowrap valign="bottom">
1681.5
</td>
<td width="88" nowrap valign="bottom">
156.4
</td>
<td width="99" nowrap valign="bottom">
1837.9
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Jan-2012
</td>
<td width="57" nowrap valign="bottom">
1685.7
</td>
<td width="88" nowrap valign="bottom">
155.7
</td>
<td width="99" nowrap valign="bottom">
1841.4
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Feb-2012
</td>
<td width="57" nowrap valign="bottom">
1696.6
</td>
<td width="88" nowrap valign="bottom">
155.1
</td>
<td width="99" nowrap valign="bottom">
1851.7
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Mar-2012
</td>
<td width="57" nowrap valign="bottom">
1707.6
</td>
<td width="88" nowrap valign="bottom">
155.0
</td>
<td width="99" nowrap valign="bottom">
1862.6
</td>
</tr>
<tr>
<td width="76" nowrap valign="bottom">
Apr-2012
</td>
<td width="57" nowrap valign="bottom">
1719.8
</td>
<td width="88" nowrap valign="bottom">
151.8
</td>
<td width="99" nowrap valign="bottom">
1871.6
</td>
</tr>
</tbody></table>
 
Over April total owner-occupier mortgage lending totalled $839 billion, up $3 billion from $836 billion in March, while loans for investment property purchases totalled $401 billion compared with $399 billion in March.
 
 
 
</body></html>

Non-banks lose ground as record low mortgage growth continues in April: RBA

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Most of the people reading this column will be either employees of small and large businesses, or owners of these companies.
Yesterday I gave a one-hour speech to a seminar of 500 small business owners. As you might imagine, my presentation was chock-a-block full of economic analysis. If you want to have a look at some of the charts, you can view them <a target="_blank" href="https://christopherjoye.blogspot.com.au/">here</a>.
Today I want to highlight two – rather unrelated – things I canvassed at the seminar. The first touched on the distribution of housing debt among those owners that have a mortgage. The second was about the key lessons I have learned starting disruptive businesses.
Based on the latest available data, the RBA estimates that the total value of all Australian household debt to their assets is just 19.4%. So the absolute “debt-to-assets ratio” in the household sector looks pretty low. A company with this level of leverage would not be regarded as risky.
What about the level of gearing within the housing market? The RBA’s analysis puts this figure at about 30%. That is, there is circa $1.2 trillion worth of mortgage debt held against $4.1 trillion worth of private housing. Again, this looks good: it is around half the equivalent ratio in the United States.
But Chris, I hear you say, what about the level of indebtedness for those, and only those, with a mortgage? And how does this change according to age and income?
The RBA has kindly obliged and supplied this data as well. The first chart below tells us for home owners with a mortgage (i.e., excluding those who have paid off all their debt), gearing rises to a peak of 63% for those aged 25 to 34 and then declines steadily to a nadir of just 9% for those aged 65 to 74. Importantly, the median level of gearing across all home owners with mortgage debt is just 44%.
Click to enlarge
<a title="Click to enlarge" rel="shadowbox" href="/images/stories/2012/05/may311.gif"><img src="/images/stories/2012/05/may311thumb.gif"></a>
The second chart teaches us that the level of leverage in the housing market rises as a function of income. As you move rightwards along the x-axis you are migrating up the household income bands. The median home owner in the bottom 20% of income earners only has a debt-to-assets ratio equal to 22%. This then peaks at more than 45% for those owners in the top 40% of earners.
Click to enlarge
<a title="Click to enlarge" rel="shadowbox" href="/images/stories/2012/05/may312.gif"><img src="/images/stories/2012/05/may312thumb.gif"></a>
The second thing I shared with yesterday’s seminar (which I gave alongside Yellow Brick Road’s Mark Bouris) were the insights I had gathered through my own experience starting businesses. Hopefully there will be some practical take-aways here for those of you who are in the midst of building a new business, and those who are considering whether to make the leap.
 
 
<hr class="system-pagebreak">
 
The first observation was that simple business models are often the best. Put another way, you need to “risk-adjust” the returns you expect to get from investing in a new company. Reinventing the wheel is great if you want to become the next Mark Zuckerberg. But for every winner there are many more losers. Unfortunately, we only see the “survivors”, which creates a downward bias in our perception of the execution difficulty. It is harder than you think!
Creating new products that have never been conceived of before can bequeath tremendous rewards, as Apple’s journey has demonstrated. At the same time, there is only one Apple, and innumerable skeletons that have been left in her corporate wake.
My own view is that innovation can be incredibly gratifying. But it is also bloody hard work. So when you start a new business, consider whether you want to grab the low-hanging fruit and execute a safe strategy, or whether you have the financial resources to weather the long, hard road to building a truly “disruptive” enterprise that is going to reshape the world in which we live.
A second learning was that “corporate structure” counts. It sounds boring, but most new businesses take quite a while to get to cashflow breakeven. You will, therefore, be accumulating tax losses along the way. Your ability to harness these losses in future years will be impacted by both the corporate structure you choose at inception, and how this changes over time.
Your corporate structure will also affect your ability to capitalise on the attractive research and development subsidies the government offers through the tax system. These can be invaluable financial oxygen for new businesses engaged in genuinely inventive activities.
A third insight was that almost all “personal partnerships” fail. If you do a study of the history of personal partnerships you will see that they have an astonishingly high attrition rate. Corporate partnerships, on the other hand, are different. A company has a much better ability to transcend personalities and the idiosyncrasies of individual relationships. While corporate partnerships can also be taxing, they are, in my experience, easier to manage. And they can be more lucrative over the long run.
When entering into partnerships, you need to always assume the worst. You should have comprehensive shareholders or partnership agreements drafted by specialist lawyers that deal with every possible adverse scenario. This is no easy task: a decent shareholders agreement can be more than 50 pages in length. But it will save you trouble down the track.
A fourth learning has been that intellectual property (IP) is a highly undervalued asset. Vigilantly protecting your IP through trademarks and patents can be an exceptionally important source of competitive advantage and commercial leverage. Again, you need sound counsel. Here I would avoid lawyers and start with an experienced patent attorney, which are usually cheap.
My penultimate observation was that human ingenuity can usually overcome even the most intractable problems. I cannot count the number of times I used to say to myself “we’re cactus”, only to sit in a room with a bright bunch of guys and come up with durable solutions. There are intelligent and executable answers to almost all commercial issues. Yet most people are intrinsically problem-oriented and find the search for solutions innately challenging. My message: be positive and condition yourself to always focusing on identifying answers.
My final lesson was not to let mediocrity pollute a high-performance personality. We all have different endowments of commitment, skill, patience, empathy and intuition. When I started out I used to torture myself about personal conflicts. Over time I have learned to, first, maniacally divorce my emotions and sense of self from all commercial decision-making, and, second, to recognise that most people are uncomfortable with this approach.
If you look at anyone who has accomplished something significant in private enterprise — and I don't mean migrating inexorably up a major bank hierarchy — you will find that they have had to overcome countless personal conflicts in the process. They say the softest thing about Frank Lowy is his teeth.
The key to the best decision-making is surprisingly tautological: you need to select the best option irrespective of what the consensus view may be. When making any decision, you will inevitably have to conflict with some section of the participants involved in the process. Few decisions make everybody happy. Those that do are almost always sub-optimal. And many of the best decisions will upset the majority.
To my mind, progress is about breaking down the barriers erected by institutional inertia. And when you smash down walls, you often break noses. Don't be afraid to do so.
Christopher Joye is a leading financial economist and a director of <a href="https://www.ybr.com.au/savings/index.cfm" target="_blank">Yellow Brick Road Funds Management</a> and Rismark. The author may have an economic interest in any of the items discussed in this article. These are the author’s personal views and do not represent the opinions of any other individual or institution. This material is not intended to provide, and should not be relied upon for, investment advice or recommendations.
</body></html>

Higher-income households with mortgages have the highest level of debt: Christopher Joye

<html><body>
Property development giant Lend Lease has put pressure on Federal Treasurer Wayne Swan to reconsider his federal budget decision to double the withholding tax.
The tax is charged on the distribution paid to foreign investors who buy into managed funds and is set to increase from 7.5% to 15% from July 1.
The withholding tax was as high as 30% under the Howard government, but was cut to just 7.5% by Kevin Rudd in July 2010.
Lend Lease chief executive Steve McCann has called the tax change “sudden, surprising and unhelpful” and says that the largest real estate and infrastructure projects cannot be funded by even the largest super funds.
“Real estate and infrastructure is heavily reliant on offshore institutional capital, especially in the post-GFC era,” he said in an email reported by the Australian Financial Review.
McCann warns that an increase in the tax will cause foreign investors to recalculate their return on investment and reconsider investing in Australia.
The end result will be that Australia’s ability to compete with other countries for offshore capital will suffer, with a flow-on effect for jobs, McCann says.
Lend Lease has $10 billion worth of construction projects on its books, including the massive Barangaroo development.
In its defence, the government claims the new tax rate is a better balance of the needs of Australia to remain an attractive destination for foreign investors while ensuring a fair return.
Treasury is estimating a tax return of $260 million over four year generated from the withholding tax.
Earlier this week, the Property Council of Australia (PCA) failed to convince the federal government to reverse its decision.
PCA chief executive Peter Verwer was in Canberra yesterday attending the Residential Markets Summit hosted by the National Housing Supply Council following a meeting with Wayne Swan.
A spokesperson for the industry body says Verwer would not be commenting any further than the PCA’s post-budget statement.
Verwer was supported by Financial Services Council head John Brodgen, representing the interests of retail and wholesale fund managers and superannuation funds.
On May 8 following the budget statement, the PCA issued a statement calling the withholding tax increase “another extraordinary misstep” by the Gillard government.
“The Rudd government scored a global coup in slashing the withholding tax to 7.5%, [and] the world responded by sending us more of their money to manage,” said the PCA at the time.
Verwer called the move “desperate and cack-handed” and said it would send “an appalling signal to international investors” daring them to try and invest somewhere else.
“This measure shreds Australia’s ambition to become the leading funds management hub for the Asia-Pacific region, and is another example of this government’s inability to sell a good news message and stick to a clear course.”
 
 
 
 
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Lend Lease slams 15% withholding tax as Property Council fails to convince Wayne Swan to scrap it

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There’s good news for first-time investors and buyers, with banks now considering casual and secondary incomes when assessing mortgage applications, according mortgage advisors Smartline.
The mortgage broking franchise says the banks are now looking favourably at a variety of income types when considering home loan applications, having tightened their lending rules in the fallout from the GFC.
“While overtime, bonuses and second jobs used to be regularly accepted by lenders, unfortunately this changed when the GFC hit,” says Smartline managing director Chris Acret.
“Those with casual or contract employment or who were self-employed also found it much more difficult to secure home financing as banks becoming very risk adverse.
“Thankfully, lenders are increasingly ‘normalising’ their lending criteria and while we haven’t yet returned to pre-GFC levels, it’s moving in the right direction,” he says.
The move will be welcomed by those investors and buyers who are self-employed or on contract or casual employment.
According to Smartline, some lenders will now also consider the income of a person working in a temporary, casual or contract position after three months, particularly if the applicant works in certain roles, such as an accountant, teacher, nurse or engineer.
This is because banks have “sensibly” revised their view on income types in light of changing work practices.
“The full-time position that was guaranteed for life is slowly becoming less and less relevant as both employers and employees look for greater flexibility in the workplace and in their lives,” says Acret.
However, he warns that different lenders could have quite different criteria when it came to assessing income types.
Find out why buying an investment property as your first purchase could be the easiest and cheapest way to get your foot on the property ladder by signing up for next week’s free Property Observer webinar with Michael Matusik: Tips for buying your first property as an investment. The webinar takes place on Tuesday, June 5 at 12.30pm.
 
 
 
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Banks considering alternative income sources when assessing mortgage applications: Smartline

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It wasn’t that long ago that many investors thought it was just new property that depreciated. But that’s changed, and most now understand that even an old property will have some sort of claim.
However, the depreciation benefits of property purchased close to June 30th are much less understood. And on the surface that’s fair enough. Let’s say, you’ve settled on a property on the 1st of June, what would be the point of paying for a schedule for just 30 days of depreciation – wait until next year, right?
Wrong. In the first financial year of ownership, it is not uncommon for an investor to claim thousands of dollars in deductions for a property purchased close to June 30.
For instance, a Sydney client of ours settled on a one-bedroom Chatswood unit on June 25th last year. The property was built in 1999 and the purchase price was $450,000. Yet, the deduction, which was for 5 days only remember, was over $5,000.
What’s the catch, I hear you say. Well, there isn’t one. The ability to make such a significant deduction for just a short period of time is due to the immediate write-off and low pooling of items that are classified as <a href="https://www.washingtonbrown.com.au/list-of-items" target="_blank">plant and equipment</a>.
Neither of these amounts should be pro-rated, so you can maximise these items whether the property has been owned for one day or 365 days. And the <a href="https://calc.washingtonbrown.com.au/wbdcalculator/" target="_blank">property age is nothing to worry about either</a>, as all properties are eligible for plant and equipment.
So, for any plant and equipment in the property valued under $300 you have an immediate write-off and for those items under $1,000, they are low-pooled and claimed at 18.75% in the first year.
Here’s another example from a client of ours that bought small unit in Melbourne’s inner city. They paid close to $300,000, the building was just over ten years old and they settled on the 15th of June. The first-year depreciation claim, for 15 days only, was a deduction of $6,000.
The items that can fall into these key categories are things like exhaust fans, ceiling fans, range hood, stoves, smoke alarms, etc. – items that most investment properties are going to have. So, the deductions soon add up.
And even if the item costs over $1,000 – but your portion is only, say $200, you can claim the item in full immediately, as your portion is under the $300 threshold.
In short, it pays to get that a schedule as soon as you settle, even if that’s at the end of the financial year. And let’s face it, who wants to be filling in the adjustment form if you wait 12 months.
 
Tyron Hyde is a director of quantity surveying firm <a href="https://www.washingtonbrown.com.au/" target="_blank">Washington Brown</a>. He has a degree in construction economics and is an associate of the Australian Institute of Quantity Surveyors.
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tyronhyde-GVUTYT8ZT3

Even if you have just bought a property, you can still claim depreciation this year

<html><body>
Fixed-rate mortgages currently account for around one in four loans (22%) written by Mortgage Choice brokers and could rise even higher following Australia’s biggest mortgage lender, the Commonwealth Bank, cutting fixed interest rates twice in May. 
However, demand for fixed-rate loans is still well below the record levels written in December 2007 (36%) and February 2008 (37%), according to data prepared by Mortgage Choice for Property Observer.
Click to enlarge
<a href="/images/stories/2012/05/mcmay30.gif" rel="shadowbox" title="Click to enlarge"><img src="/images/stories/2012/05/mcmay30thumb.gif"></a>
Source: Mortgage Choice
The rush to take out fixed-rate mortgages over this period burned many fixed-rate borrowers who took the three-year fixed products, as the RBA rapidly reduced the cash rate in response to the GFC. 
The RBA cut the cash rate from 7.25% in August 2008 to 3% by April 2009. 
Borrowers who took out a three-year fixed-rate loan in August 2008 would only have been able to refinance into a cheaper product late last year – unless they were willing to pay early exit fees – in some cases, thousands of dollars. 
“The cash rate continued to rise during early February 2008, while fixed-rate demand began tapering off as the impact of the GFC moved closer to home,” explains Mortgage Choice spokeswoman Belinda Williamson. 
“In the years since we have not seen fixed-rate demand return to the pre-GFC levels. The closest it has come was in March 2012, when fixed-rate demand reached 26%.” 
She says the jump in fixed-rate loan demand in 2007, up from 23% in July 2007 to 27% in August 2007, coincided with the cash rate rising for the first time in almost one year. 
“The cash rate jumped again in November 2007, and during this same month, Mortgage Choice reported record levels in the fixed-rate loan uptake (to 37%, up nearly six percentage points from October 2007),” Williamson says. 
“The cash rate continued to rise during early February 2008, while fixed-rate demand began tapering off as the impact of the GFC moved closer to home.” 
Currently, demand for fixed-rate mortgages has remained high despite the Reserve bank cutting the cash rate in November and December, and a double rate cut in April.  <a target="_blank" href="/news">Westpac predicts another 50 basis points in cuts between now and August.</a>
Official ABS figures also have fixed-rate demand at 14.5%, the highest level since 2008, with most of the growth occurring during the period starting in November when the RBA began cutting official rates.
Figures compiled by Canstar Cannex for The Australian also show that fixed rate loan commitments have grown rapidly after making up just 7.5% of all new mortgages in March last year.
In January 2010, fixed rates accounted for just 0.88% of Mortgage Choice loans – the lowest level in five years.
Currently, demand is being driven by the cheap rates on offer in the fixed-rate space.
The Commonwealth Bank currently offers a standard variable mortgage of 7.01% but a three-year fixed rate of 5.99%, which illustrates in a nutshell why fixed-rate products remain so appealing. 
Aside from the CBA, Westpac has trimmed its three year-fixed mortgage by 20 basis points to 6.19%; HSBC has cut its three year fixed-rate product to 6.09% (or 5.99% for those investors who take up the interest-in-advance offering) and ME Bank has cut its three-year fixed rate mortgage product to 5.99%.
 
 
 
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