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.

Joel Robinson

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

The Gold Coast Planning Committee has supported the preliminary approval for the Benowa Gardens Urban Village project following an extensive community consultation and assessment process.

The proposal will now proceed to a full council vote on June 2.

The application sought approval for a masterplanned urban village on the existing Benowa Gardens Shopping Centre site, combining new housing, retail, dining, health and lifestyle amenities within a walkable, integrated precinct.&nbsp;

The proposed redevelopment includes around 413 apartments integrated above a revitalised mixed-use centre featuring a full-line supermarket of 4,000 sqm, 6,000 sqm of specialty retail and dining space across around 30 retailers, a 7,000 sqm health and wellness precinct, and roughly 9,630 sqm of office and medical suites.&nbsp;

<img alt="$1b Benowa Gardens Urban Village moves to Full Council following Planning Committee support" data-entity-type="file" data-entity-uuid="fb36ae47-80bc-45f0-9914-31b0c7b6007d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/PR26576%20Ashmore%20Road%20C4%201121%20FI.jpg?VersionId=6mRKk2uU4r67TmTt39DKGUlvFRbTVqWa" />

The broader masterplan also includes very significant traffic and transport improvements, wide pedestrian walkways, upgraded pedestrian and cycle connections, and enhanced public areas designed to create a more connected and walkable community environment.&nbsp;

Centre owner Patrick Lu said the milestone reflected months of detailed planning, technical assessment and ongoing communication with local residents, businesses, schools and stakeholders.

“We appreciate the time, consideration and care Council officers and the Planning Committee have given this proposal throughout the assessment process,” Lu said.

“We also sincerely thank the local community for engaging with us, sharing feedback and participating in the consultation process over many months.

<img alt="$1b Benowa Gardens Urban Village moves to Full Council following Planning Committee support" data-entity-type="file" data-entity-uuid="32fd1fc3-d0e6-485f-ac57-9916c9bcb818" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/PR26576%20Ashmore%20Road%20C5%201121%20FI_2.jpg?VersionId=fz8qQKDBLQ7MyFRc856Zccfbh9nFwLOe" />

“We understand projects of this scale bring questions and concerns, which is why we have worked hard to listen carefully, provide information transparently and continue refining elements of the proposal where possible.

“Our vision has always been to create a well-designed, community-focused urban village that responds to the changing needs of the Gold Coast, while delivering improved amenity, housing diversity, healthcare access and local lifestyle benefits.

“This proposal is about creating a genuine live-work-play environment where residents can access everyday services, schools, healthcare, dining, shopping and green space within walking distance, while also supporting local jobs and economic activity.”

<img alt="$1b Benowa Gardens Urban Village moves to Full Council following Planning Committee support" data-entity-type="file" data-entity-uuid="50dfbd04-590e-4fc6-983b-766880947867" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Dining%20Day%20Time%20-%20High%20Resolution.jpg?VersionId=BP7ZoKJ0DdL_8iRkkC8VVx99moICV6kg" />

Lu said the proposal had evolved significantly through consultation and technical review, particularly around traffic, pedestrian and student safety and neighbourhood connectivity.&nbsp;

Melissa Griffin, Director at Urbis, said the recommendation recognised the strategic importance of delivering more housing and services within established urban areas already supported by infrastructure.

“This proposal represents the type of thoughtful, integrated growth that planning frameworks across South-East Queensland are encouraging,” Ms Griffin said.

“The project seeks to place housing, retail, healthcare and employment opportunities together in a highly accessible location close to schools, transport and existing services.

“Importantly, the process has involved significant technical assessment and community engagement to ensure local issues and feedback were properly considered throughout the planning pathway.”

$1 billion Benowa Gardens Urban Village heads to council vote following Planning Committee support

Surfers Paradise is officially set for its first new residential development with a 45-storey skybridge connecting the two towers.

John Camilleri’s Celestino Developments has been given the green light by the Gold Coast City Council to develop its major beachfront precinct across its huge 4,000 sqm oceanfront site at <a href="https://www.apartments.com.au/new-apartments/63-79-garfield-terrace-surfers-paradise-qld-4217">63–79 Garfield Terrace</a>, just five months after its <a href="https://www.apartments.com.au/news/qld/first-look-exclusive-billionaire-winx-breeder-s-bold-two-tower-surfers-paradise-play-with-45th-storey-skybridge">submission in late 2025</a>.

The approved scheme will deliver two towers rising 55 and 48 storeys, connected by a skybridge positioned on level 45 that will house a range of resident-only wellness and entertainment spaces.

In its notice of approval, the Gold Coast City Council said the&nbsp;proposed overall built form has been designed to complement the scale, intensity and protect the adjacent amenity and surrounding streets through the use of varied setbacks, site cover and architectural elements.

<img alt="First look exclusive: Billionaire Winx breeder’s bold two-tower Surfers Paradise play with 45th-storey skybridge" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-30%20at%209.53.48%E2%80%AFAM.png?VersionId=ADyPJ_TFbJvSU9wZFOiCBnlPtgF7VWqW" />

Designed by <a href="https://www.apartments.com.au/architects/dbi">DBI</a>, the development will comprise 275 apartments across the two towers, including a mix of two-, three-, and four-bedroom residences, as well as several penthouses. The apartments will sit above a landscaped podium featuring more than 90 metres of beachfront pool frontage, private resident lawns, lounges, and wellness spaces.

DBI said the design draws heavily from the movement and form of the coastal environment, with curving balcony lines and sculpted façades intended to soften the scale of the towers while maximising ocean outlooks and passive shading outcomes.

“The project occupies a rare, uninterrupted oceanfront site and has been shaped by a design philosophy that merges architectural elegance with environmental responsiveness and a carefully curated lifestyle experience,” DBI said in planning documents submitted to the Gold Coast City Council.

The most distinctive element of the approved project is the skybridge linking the two towers at level 45. The elevated communal space is planned to include executive lounges, formal dining areas, wellness facilities, and panoramic ocean-facing outlooks.

“The skybridge enhances the identity of the development, promotes social interaction, and delivers a lifestyle experience not found elsewhere on the Gold Coast,” DBI said.

At podium level, residents will have access to a suite of resort-style amenities, including resident lounges, private dining rooms, a yoga lawn, gymnasium, plunge pools, and treatment spaces. The beachfront pool has been designed with separate lap, lounge, and children’s areas extending across the width of the site.

The project will also introduce new food and beverage offerings along the Enderley Avenue and Oceanway frontages, contributing additional activation to the beachfront precinct.

First look: Winx billionaire’s beachfront Surfers Paradise apartment development greenlit

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

<html><body>
Online bank ING Direct is Australia’s biggest second-tier lender for owner-occupier mortgages and the Bank of Queensland has the biggest investor mortgage book, according to September figures released by the prudential authority APRA.
The second tier comprises banks that fall outside the big four banks and their subsidiaries, namely Commonwealth Bank (and its subsidiary Bankwest), Westpac (including subsidiaries Bank of Melbourne and St George), ANZ and NAB.
The latest figures show that ING Direct, the Australian subsidiary of the Dutch banking giant ING, has an owner-occupier mortgage book of $28 billion and an investor loan book of over $9 billion.
Bank of Queensland has an investor mortgage book of $9.6 billion and an owner-occupier mortgage book valued at $11.6 billion.
Both banks have passed on the full November 2 RBA rate cut to their borrowers, with ING Direct’s Mortgage Simplifier product reducing to a rate of 6.87%, effective November 7, while the Bank of Queensland will reduce its standard variable rate home loan to 7.61% on November 11.
Another small lender, Rabobank, which specialises in rural loans, will reduce the variable base rate on its rural loans by 0.25% per annum.
 
Second-tier lenders (ranked by size of owner occupier mortgage book)
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="205" valign="top">
 
</td>
<td width="205" valign="top">
Owner occupier mortgage book
</td>
<td width="205" valign="top">
Investor mortgage book
</td>
</tr>
<tr>
<td width="205" valign="top">
ING Direct
</td>
<td width="205" valign="top">
$28 billion
</td>
<td width="205" valign="top">
$9.4 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Suncorp
</td>
<td width="205" valign="top">
$21 billion
</td>
<td width="205" valign="top">
$8.2 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bendigo and Adelaide Bank
</td>
<td width="205" valign="top">
$13 billion
</td>
<td width="205" valign="top">
$8.3 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of Queensland
</td>
<td width="205" valign="top">
$11.6 billion
</td>
<td width="205" valign="top">
$9.6 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Citibank
</td>
<td width="205" valign="top">
$4.7 billion
</td>
<td width="205" valign="top">
$2.4 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
AMP Bank
</td>
<td width="205" valign="top">
$4.6 billion
</td>
<td width="205" valign="top">
$1.7 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
ME Bank
</td>
<td width="205" valign="top">
$4.5 billion
</td>
<td width="205" valign="top">
$1.1 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
HSBC
</td>
<td width="205" valign="top">
$3.4 billion
</td>
<td width="205" valign="top">
$3.8 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
MECU Limited
</td>
<td width="205" valign="top">
$1.5 billion
</td>
<td width="205" valign="top">
$0.3 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Macquarie Bank
</td>
<td width="205" valign="top">
$1.4 billion
</td>
<td width="205" valign="top">
$0.7 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of China
</td>
<td width="205" valign="top">
$0.3 billion
</td>
<td width="205" valign="top">
$129 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Bank of Cyprus
</td>
<td width="205" valign="top">
$0.2 billion
</td>
<td width="205" valign="top">
$ 35 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Rabobank
</td>
<td width="205" valign="top">
$0.2 billion
</td>
<td width="205" valign="top">
$16 million
</td>
</tr>
<tr>
<td width="205" valign="top">
Beirut Hellenic Bank
</td>
<td width="205" valign="top">
$120 million
</td>
<td width="205" valign="top">
$0.24 billion
</td>
</tr>
<tr>
<td width="205" valign="top">
Investec
</td>
<td width="205" valign="top">
$25 million
</td>
<td width="205" valign="top">
-
</td>
</tr>
</tbody></table>
Source: APRA
 
 
 
 
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lschlesinger-FZcF9M3vE6

ING Direct the biggest of the small

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Both Westpac and the Housing Industry Association believe further rate cuts are needed to stimulate new home lending following another “lacklustre” result in September. 
Housing finance to owner-occupiers increased by 2.2% September, but only 1% of this growth came from new mortgage lending with rest the result of borrowers refinancing their mortgages to take advantage of cheaper rates. 
The September result was slightly above market expectations (1.5%) but not as strong as that anticipated by Westpac, which had forecast mortgage growth of 3% over September. 
For the year to date, new lending is down by 3.8%. 
Westpac senior economist Andrew Hanlan says the RBA's November rate cut will provide some relief to the sector, with the bank sticking with its forecast of further 0.75% cut in rates still to come over the next 12 months. 
“New lending is only a little above that prevailing over the second half of the 1990s,” he says. 
Hanlan says the mix of finance was disappointing” from a new supply, construction perspective”. 
“Finance to owner-occupiers for the construction of new dwellings edged lower in the month, down 0.2%, to be 5.7% lower for the year to date,” he says.
HIA acting chief economist Andrew Harvey remains hopeful the fall in the number of loans for the construction or purchase of new homes is “merely a blip in an overall trajectory of a return to growth in new home lending”. 
“At least today’s fall in new home lending is not of an overly large magnitude, and once we see the positive impact of the Melbourne Cup day rate cut flow though we should see lending begin to gain ground. “Moreover, if the RBA fires up with a second rate cut in December, or at latest early 2012, which is warranted given domestic and global economic conditions, then the prospect of a return to decent levels of new home building is good,” he adds. 
 
“The sector faces a number of headwinds: interest rates, stretched affordability and household's desire to pay down debt. These factors are offsetting the positives of rising household incomes, relatively low unemployment and a shortage of housing stock.” 
By state, owner-occupier finance for the year to date reveals some divergences. 
There were signs of strength in WA, with mortgage lending to owner-occupiers up 9.1% over the nine months to September. 
However, NSW (1%) and South Australia (2.2%) are broadly flat for the year while mortgage lending has weakened in Queensland (down 9.5% for the year), Victoria (down 4%) and Tasmania (down 5%). 
Finance to investors was up 1.9% in the month, rebounding 8% since April, but still down 4.2% for the year to date. 
“While rents are strengthening, established house prices have tended to trend modestly lower since mid-2010,” says Hanlan.
<a target="_blank" href="https://www.propertyobserver.com.au/economy/one-rate-cut-not-enough-to-help-economy-but-watch-employment-data-macquarie/2011110952285">Macquarie Investment Management agrees that more rate cuts are needed.</a>
 
 
 
 
 
 
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More rate cuts needed following lacklustre mortgage lending figures: HIA

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First-home buyers have emerged from hibernation becoming a dominant segment of the housing finance enquiry market, according to mortgage broker Loan Market.
First-time buyer enquiry levels were at their highest in almost two years after activity plummeted following the cessation of the federal government boost in 2009 and a sequence of interest rate rises during 2010.
The segment, who seem poised to spend, represented 51% of loan enquiries to Loan Market during October, according to Loan Market chief operating officer Dean Rushton.
“We’re finally starting to see signs of optimism and more confidence from that segment of the market. And predicted further rate cuts from the RBA would help to build that confidence,” Rushton says.
Tasmania had the highest number of enquiries followed by Queensland, Victoria, the Australian Capital Territory, South Australia, Western Australia and the Northern Territory.
“After a few years of hibernation, first-home buyers are back and are now the dominant section of the market for enquiry,” Rushton says.
Rushton notes the end of stamp duty concessions for first-home buyers in New South Wales from the end of 2011 year has boosted activity in that state.
“The softer real estate market is another encouragement for first-time buyers if they are in a position to be active in the market,” he adds.
<a href="https://www.propertyobserver.com.au/news/one-in-10-buyers-choosing-to-rent-to-invest/2011070750728" target="_blank">One in 10 first-time buyers are choosing to make their first real estate purchase an investment property</a>. 
For advice on buying your first investment property, download our free e-book.
 
 
</body></html>

jchancellor-FAypfDUnLy

First-home buyer lending enquiries at two-year high: Loan Market

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Scott Pape, the financial adviser, broadcaster and author of The Barefoot Investor, has explained why he is keeping his home loan variable despite the fact that the banks are currently offering lower fixed rates. He says he envisages 2012 will be the time to “tart yourself around to the banks” to get a better deal next year.
“One reason is that having the security of locking in your rate comes at a cost: (usually) fixed repayments, and a hefty break fee if you want to walk.
“Banks behave in their own best interests,” he told subscribers to <a href="https://www.barefootinvestor.com/" target="_blank">his website</a>.
“A smarter strategy may be to wait and watch what happens with the unfolding debt crisis.
“We could see official interest rates come down, and cautious consumers continue to slow their borrowing (building approvals dropped 13.9% in September), causing banks to scramble for our business next year,” Pape wrote.
“That’s when I’ll be looking to lock in my rate.”
Pape, whose early days were as an investment adviser with EL&amp;C Baillieu, says until then he will make extra repayments: the quarter per cent cut this week translates into an (average) $50 a month cut, or $41,000 saved in interest over the life of a loan.
Pape recently noted that since Wayne Swan banned exit fees, the banks had found another way to stop their customers from switching to get a better deal.
“Fixed-rate deals give them that power.”
But he noted there’d be a $600 establishment fee at the start, “and if interest rates drop lower than your fixed rate they will slug you with a ‘break fee’ representing the difference between the two rates, multiplied by the length of time left on your fixed contract – which can add up to thousands of dollars.”
“If you’re really struggling, locking in your rates can give you the security of fixed repayments, but for everyone else it’s too much of a gamble.”
 
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Scott Pape, the barefoot investor, suggests staying variable

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The NSW Valuer-General has determined that the land tax threshold for the 2012 land tax year is $396,000. Every investment property above that level will be billed land tax. It follows a 1.766% increase in values, which given three-year rolling averaging will result in a 0.2% increase in the land tax threshold for the 2011 land tax year of $387,000.
During the 2011 land tax year there had been a 2.9% rise in the 2011 threshold for property taxes from $376,000, when overall land values in NSW, including industrial and commercial as well as residential, rose an average of 5.42%.
The low 0.2% increase in the threshold might cause some NSW investors to creep into the tax-paying category if they were sitting just below the current threshold and have shown some value appreciation resilience in the yet-to-be released individual valuations.
NSW Valuer-General Philip Western will issue individual new valuations later this year that will form the basis of tax assessments sent out by the NSW Office of State Revenue early next year. The State Government bases individual assessments on rolling three-year averaging of land valuations to take account of changing property values.
The state government collects about $2 billion in land tax a year. Non-residential properties account for about 60% of land tax revenue.
In the current year an investor owning a property with a land value of $470,000 (with the 2011 threshold of $387,000) property tax is levied on the difference of $83,000 at 1.6¢ on the dollar, plus $100, so the tax payable is $1,428.
The principal place of residence is exempt from land tax. Land tax is a tax levied on the owners of land in NSW as at midnight on December 31 of each year. Land tax applies to land regardless of whether or not income is earned from the land. The land tax assessment is calculated on the combined value of all the taxable land you own above the threshold.
The value of taxable land does not include any structures or improvements on the land such as a house.
There has been a threshold since 2005. From the 2007 tax year onwards the threshold is the average of three years - the current year and two prior years.
<table cellpadding="0" border="1"><tbody>
<tr>
<td>
Year
</td>
<td>
Indexed amount
</td>
</tr>
<tr>
<td>
For the 2010 land tax year
</td>
<td>
$380,000
</td>
</tr>
<tr>
<td>
For the 2011 land tax year
</td>
<td>
$401,000
</td>
</tr>
<tr>
<td>
For the 2012 land tax year
</td>
<td>
$408,000
</td>
</tr>
<tr>
<td>
Average
</td>
<td>
$396,000
</td>
</tr>
</tbody></table>
 The Valuer General says the $408,000 figure was arrived at through a specific formula as required under the Land Tax Management Act.
“Put simply it is the 2011 land tax year indexed amount ($401,000) times the average change in land values from 1 July 2010 to 1 July 2011 – in this case 1.766%,” he notes.
For advice on buying your first investment property, download our free e-book.
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NSW land tax threshold increases 0.2% after a 1.77% across-the-board gain

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Migrants and the over-50 are set to become favoured home lending customers of ANZ.
In its 2011 annual results presentation ANZ says it is looking to form deeper relationship with five customer segments namely: “affluent, migrant, young money, over-50s and ANZ staff”.
Migrants and over 50s appear to be a particular focus of the bank, with <stockticker>ANZ</stockticker> committing to providing more specialist migrant teams and more bankers to focus on retirees.
First-home owners are notably absent from its list of desired customers.
The annual results revealed that first-home owners comprised just 9% of the bank’s $170 billion mortgage portfolio and only 8% of new lending in the 2011 financial year.
Owner-occupier mortgages make up just under two-thirds (64%) of its mortgage book.
NSW and the ACT (27%) and Victoria (28%) account for more than half of its mortgage portfolio, with just under one in five borrowers coming from Queensland.
The bank revealed a 12% rise in underlying profit for the 2011 to $5.6 billion.
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ANZ to focus on migrant and over-50 home loan customers

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The number of first-home buyer market entering the market is up 40% compared with a year ago, with NSW leading the charge, according to mortgage broker AFG. 
The AFG Mortgage Index for October shows that first-home buyers comprised 16.4% of all loans processed by AFG brokers – a 40% increase for this buyer category compared with October 2010, when they comprised 11.8% of the mortgage market. 
The number of first-home buyers who took out loans in October was the greatest number entering the market since September 2009 –when the full First Home Owner Boost Scheme, introduced to support the housing market following the GFC – came to an end. 
First-home buyers were particularly active in NSW, where they represented 21.1% of home loans in October. This buyer segment was also well-represented in Queensland (17.9%) and Western Australia (17.3%). 
The decision by the NSW state government to end first-home buyer stamp duty exemptions and concessions for the purchase of established on January 1, 2012 has most likely contributed to the pick-up in numbers as first-home buyers look to beat the deadline. 
From January 1 the NSW government’s <a href="https://www.osr.nsw.gov.au/benefits/first_home/faqs/fhplus1/">First Home Plus scheme</a>, which provides stamp duty exemptions on homes valued up to $500,000 and concessions on duty for homes valued between $500,000 and $600,000, will come to an end to be replaced by the <a href="https://www.osr.nsw.gov.au/benefits/first_home/faqs/new_home/">First Home - New Home Scheme</a>, which provides stamp duty exemptions and concessions for new homes or vacant land intended to be used as the site for a new home.
The November interest rate cut is expected to encourage more first-time home buyers over the coming months, with Real Estate Institute of Australia acting president Pamela Bennett calling it particurlarly good news for this sector of the market.
RateCity CEO Damian Smith says for first-home buyers who haven’t yet entered the market, “lower rates will turn the clock back to 2010 and have an appreciable impact on affordability”. 
BIS Shrapnel chief economist Frank Gelber expects first-home buyers to return to the market in growing numbers following the rate cut and to drive the market over the next year.
Percentage of borrowers fixing their home loans
<img style="border-style: initial; border-color: initial;" src="/images/stories/afgnovember3.gif">
Source: AFG
In line with mortgage broking franchise <a href="/news">Mortgage Choice</a> recording sales of fixed-rate mortgages at a three and half year high in October, AFG also recorded a big jump in fixed-rate mortgages, with sales of the products rising from 16.6% of all loans arranged in September to 20.4% in October, the highest proportion since March 2008.
In July 2011, fixed-rate mortgages comprised only 7.9% of home loans arranged by AFG brokers.
Mark Hewitt, general manager of sales and operations at AFG says: “Buyers are reaping the benefits of one of the most competitive mortgage markets we’ve seen in years. Discounted fixed rate loans appealed to all buyer types, but especially first home buyers and those looking to refinance. 
“We have been slightly surprised with the popularity of fixed rates given it has been generally predicted variable rates would decrease and we would now expect the proportion of fixed rate loans to fall, following the cut in variable rates announced this week,” Hewitt says. 
The October index also showed a growing desire among borrowers to use lenders outside the major banks and Hewitt is hopeful the rate cut will drive further support for a recovery of the second tier lending market. 
Non-majors have seized more market share than at any time over the past 12 months, comprising 21.1% of all home loans. 
Their products are of particular appeal to first-home buyers, where almost 30% of the market is held by non-majors, as well as buyers looking to refinance, where non-majors account for a 21.2% market share.
The percentage of investment loans fell slightly to 35.6% compared with 37.7% in October with investors especially active in NSW (39.2%) and Vic (38.9%) with lower levels of activity in QLD (32.9%), WA (32.2%) and SA (29.8%). 
AFG brokers account for one in 10 mortgages arranged in Australia.
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NSW leads revival of first-home buyer market - and the fix is on: AFG

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Do you get a fair return on your savings? And what returns do the major banks earn over and above the interest rate they pay you on your cash? Indeed, why do the banks “cap” the returns on your savings accounts at all? These are all interesting questions that I will use to prime today’s column.
We have become so conditioned to being subject to a fixed cap on our savings rates — either via a term deposit or through variable rates that adjust in line with the RBA’s target cash rate — that the notion of not having an interest rate cap seems positively odd.
But imagine if a bank turned around to you and said, “Instead of fixing your 12-month term deposit rate at, say, 5%, we are going to target giving you a 5% return, and if we can earn more on our lending and investing activities, we will pay you more. In this way, when the bank does well, you do well”.
Today the banks are implicitly saying the opposite: namely, “We will pay you 5% per annum fixed, and everything we earn above that we are keeping 100% for ourselves and our shareholders”.
To get to the bottom of this you need to first understand your relationship with the banks. When you put your money on deposit you are actually lending to them. In fact, legally and economically, you are a senior-ranking “creditor”. You are in the same position as the bank is when it lends money to you to buy a home. It is funny how nobody thinks of savings like this!
Yet on almost all your “at-call “or “transactional” savings accounts, you get little if any return (i.e., the banks usually pay zero interest rates). However, the longer you are willing to commit to lend to, or finance, the banks, the higher the interest rate they will normally offer you. Now this makes sense. The price of money ordinarily rises with the term of the loan.
What then do the banks actually do with your money? At its most basic level, they take the cash you lent them, which, formally, is a “liability” the bank must repay you, and use that money to make new loans to small businesses, corporations, and households. Roughly 60% of your money will be invested in residential and investment property loans. The remaining 40% will be lent to businesses, from SMEs to large companies.
The bank then generates two forms of return over and above the (much lower) interest rate it pays you. First, it charges businesses and households substantially higher rates than those which you earn on your savings accounts.
According to RBA data, the average “discounted” home loan rate following Tuesday’s cut should be around 6.8% per annum. In comparison, the average bank pays a 0% interest rate on your transaction account. If we take the average “bonus” savings account, the typical bank is paying you about 5.2%.
In this case, therefore, the spread between the interest rate the bank earns on its home loans and the interest rate it pays you on your cash is about 1.6% per annum.
Remember, however, that 40% of your money is being lent to businesses. Again using RBA data adjusted for Tuesday’s cut, the average small business pays a 9.7% per annum interest rate on its bank loans. If the small business offers up a home as security for the loan, the interest rate will be just under 9%.
So when it comes to small business lending, the interest rate the banks earn (or “spread”) beyond that which they pay you in your “bonus” savings account are between 3.6% and 4.5% per annum.
What about the rates the banks charge on personal loans and credit cards? According to the RBA, the average personal loan rate is around 15% per annum, while the average “discounted” credit card rate is 13.2%.
Once again, the banks are earning substantial interest rates beyond what they pay on your savings. In fact, multiples more in the case of personal loans and credit cards, even after accounting for loan losses.
All told, the RBA estimates that the average net interest rate the major banks generate beyond the interest they pay on their funding is about 2.4% per annum.
Regional banks earn a materially lower 1.6% per annum spread, or “net interest margin”. Why do they do worse? They pay higher rates to the people that fund them. So why do they have to pay more than the majors? Because their “credit ratings” are lower. This means their perceived risk is higher.
(As an aside, I have previously argued that the risk of catastrophic loss in a simple, “narrow” bank like a “regional” is less than that associated with a much more complex conglomerate like the majors, which are stretched across Australian and foreign operations, and all manner of other activities, including funds management, and proprietary trading.)
The average 2.4% interest rate the majors generate above their cost of funds is then boosted significantly further by “non-interest income”, which mainly refers to “fees”.
 
<hr class="system-pagebreak">
 
That’s the easy part. The much more complex aspect of the business of banking is that these enterprises take the cash (or “equity”) they get from their shareholders and use it to make loans to businesses and home owners that are worth multiples of that equity. That is, they are highly “leveraged”.
More specifically, they borrow for the relatively short term from people like you and me, and from institutional investors (roughly 50% of their money comes from mums and dads, 40% from institutions and 10% from shareholders), and then lend that money out for up to 30 years as home loans.
This begs the question: what happens if I want my money back? If, for example, I have put $100 in my savings account, and the bank has used that money to offer 30-year home loans, how can the bank possibly repay me my money?
The short answer is it can’t. The business of banking is based on what is known in the jargon as an “asset-liability mismatch". Every once in a while mums and dads decide they don't trust the bank anymore, and rush to withdraw their cash en masse. At the same time, the institutional investors that lend the banks the other 40% of their funding for terms ordinarily less than five years may also refuse to roll over these loans.
Under the law, if you do not have a reasonable expectation of meeting your current liabilities (e.g., repaying your depositors), you are, by definition, trading insolvent. So if there were ever a “run” on a retail bank, with large volumes of depositors asking for their money back, the bank would be legally insolvent in the absence of some other support from taxpayers.
In order to address this flaw at the heart of banking, which every few decades tends to lead to banking crises (in the 1890s around 90% of all private banks in Australia failed), governments have developed a number of safeguards.
The first protection was to create a taxpayer bank that was explicitly established to lend to the banks, and thus supply them with so-called “liquidity”, during crises. This is known as the Reserve Bank of Australia, and a self-described part of its mandate is to serve as a “lender of last resort” to the banking system.
A second, more recent, protection was to supply a minimum taxpayer guarantee of retail deposits. That is, if the bank fails, the government will guarantee that a minimum dollar sum will be repaid to you.
A third protection used during the global financial crisis (for the first time) was to have Australian taxpayers guarantee the banks’ institutional debts. That is, the government told the banks’ institutional lenders that if the banks ever defaulted on these loans, taxpayers would step in and pick up the tab.
If you think through this carefully, you start wondering about what is a fair distribution of returns between banks and their creditors (i.e., you and me). You ask yourself the question, "With all this taxpayer support, should I be expecting more bang for my buck on my savings?"
We have learnt today that ignoring all the fees banks produce on their products, they are able, on average, to generate net interest rates of around 2.4% per annum beyond what they pay their funders: viz., savers and their institutional lenders.
In thinking about the question of fairness, I will leave you with one chart. It was recently published by the Reserve Bank of Australia, and it shows the major banks’ “returns on equity”. In the last half-year, these annualised at close to a 20% rate. 
Regional banks manage to attract shareholders with much lower, early-teen, returns on equity. We need more give, and less take.
<img src="/images/stories/nov3.gif">
Christopher Joye is a leading financial economist. The above article is not investment advice.
 
 
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chrisjoye-JYhJsTrNRC

More give, less take from banks

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By the reaction in the media, yesterday's rate cut by the Reserve Bank is the greatest thing since, well, the last rate cut 31 months ago. It's going to boost <a href="https://www.smh.com.au/business/retail-likes-rate-cut-20111101-1mtvg">retail</a>, <a href="https://smh.domain.com.au/boost-for-home-owners-as-banks-pass-on-rate-cut-20111101-1mtzj">housing</a> and even <a href="https://www.news.com.au/money/interest-rates/christmas-cheer-over-latest-rates-cut/story-e6frfmn0-1226183081358">Christmas</a>. Truly a miracle.
Yet all this reaction, and that on TV and radio yesterday and this morning, completely misses several important points.
The first is that the rate cut will cause the banks to cut their deposit rates, meaning savers will have less income, especially those who depend on fixed income from bank term deposits, such as pensioners and superannuants.
Secondly, the cut will, if it sparks a halt to the current slide in housing prices across all capital cities (they fell 1.2% in the September quarter, according to the Australian Bureau of Statistics and 2.2% in the 12 months to the same quarter), then house prices will start rising, thereby ending the small improvement in housing affordability we are currently witnessing.
But more importantly, the group of people who will get relief from the lower cost of their housing and other loans is much smaller than you thought.
If only our pundits in the Fairfax and News Limited press, plus the ABC, had read the Reserve Bank's Financial Stability reports, such as the <a href="https://www.rba.gov.au/publications/fsr/2011/sep/pdf/house-bus-bal-sheet.pdf">second one for 2011</a> released in late September they would have found something to their interest, and changed their reporting yesterday and today.
Put simply, many Australians are deleveraging and saving more. The higher savings are well known, but not too many of our pundits have bothered to think about how that is being achieved; it is not just a case of saving more money in their accounts ($12 billion extra in September)
Australian mortgagees are repaying more than the minimum on their housing loans, and credit card holders are also repaying their credit card loans faster than they have to. As the RBA explained in the September Stability Review:
"Contributing to the slower pace of debt accumulation, some households are saving more by choosing to pay down their debt more quickly than required.
"Net repayments on credit cards have picked up in recent months. Many housing loan borrowers have continued to make substantial excess principal repayments, even as higher interest rates have raised required interest -- and thus total -- repayments.
"The average excess repayment is currently equivalent to around three-quarters of the scheduled total (principal plus interest) repayment. Consistent with this tendency to pay debt ahead of schedule, surveys have shown that a high share of households consider repaying debt to be the wisest place for savings.
"Households that make excess repayments on their home loans generally build up buffers that they can draw down in the future if required. This should be regarded as a positive development for the resilience of the sector. These shifts in saving and borrowing behaviour have in part been enabled by a favourable labour market and solid income growth.
"Growth in gross income therefore outpaced the impact of higher interest payments, such that growth in real disposable income per household (after interest payments) also strengthened, to 3.3 per cent over the year to the June quarter, up from 2.3 per cent over the year to the December 2010 quarter.
"This increases the resilience of households to shocks, relative to countries where it is less common to do so. As well as providing a cushion against changes in borrowers’ financial circumstances, excess repayments increase the distance between the remaining loan balance and a property value that could be lower in the future, making negative equity positions less likely."
These trends are also ignored by the same writers when they warble on about the rising level of mortgage stress. Mortgage stress has always been with us, no matter the state of interest rates; some people who have lost jobs, seen pay cut or are starting out on the home buying treadmill feel it more than others.
But how can mortgage stress be a problem when a large proportion of people with mortgages are paying off those mortgages faster than they can? In other words, they are paying back more than the minimum, which is always recommended by advisers because it builds up buffers and reduces the principal faster than it would normally be reduced.
The fact that Australians with mortgages are repaying their loans faster is also ignored by the doom and gloomers who predict a nasty fall in property prices and a re-run of what we have seen overseas. They include Professor Steve Keen.
And finally, the most desperate piece of marketing came from Fairfax property website Domain, which sent <a href="https://view.email.domain.com.au/?j=fe6815757367057d7610&amp;m=fecb15717d62067f&amp;ls=fde511727c6000787d137970&amp;l=fe9c157177600c7c77&amp;s=fe281c7574640379771177&amp;jb=ffcf14&amp;ju=fe2715797c61017b741672&amp;r=0">this email</a> to registered users yesterday afternoon:
<a target="_blank" href="https://view.email.domain.com.au/?j=fe6815757367057d7610&amp;m=fecb15717d62067f&amp;ls=fde511727c6000787d137970&amp;l=fe9c157177600c7c77&amp;s=fe281c7574640379771177&amp;jb=ffcf14&amp;ju=fe2715797c61017b741672&amp;r=0"><img src="/images/stories/dyernov3.jpg"></a>
"This fall in rates will be greatly appreciated by households as it will put an extra $60 into their pockets each month," said Domain property expert Carolyn Boyd. Talk about desperation.
The reality is that most mortgage holders will simply leave their payments unchanged and effectively repay their loan by an extra $60 a month or whatever the saving is on their mortgage.
This article originally appeared on <a target="_blank" href="https://www.crikey.com.au/">Crikey</a>.
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The great mortgage stress myth: We're paying off our homes faster

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Federal Treasurer and Acting Prime Minister Wayne Swan has launched a vitriolic attack on NAB, labelling the bank “greedy” and saying it has “kicked working families in the guts” after it did not pass on the full 25-basis-point rate cut to borrowers today.
The bank will pass on 20 basis points rather than 25 basis points, blaming increased costs of funding for the decision.
“It is a greedy decision and one not justified in my view by the fundamentals,” says Swan, who before yesterday’s RBA announcement said banks would have no excuse for not passing on the full rate cut.
The attack comes despite the fact NAB has offered the lowest standard variable rate of the major banks for over two years and will continue to be the cheapest lender of the big four when it cuts its rate from 7.67% to 7.47% on Monday next week.
The five basis points the bank will not pass on to borrowers will boost its earnings by an estimated $65 million. Last week NAB announced its annual profit for the 2011 financial year was $5.2 billion.
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