The idea of a low-maintenance forever home located close to the city were the two driving factors behind a recent purchaser’s journey at Murcia, the under-construction East Brisbane apartment development by Sarazin.

Last year, Lois and her husband purchased a two-bedroom plus multi-purpose room (MPR) apartment in the new building, which is being constructed by Hutchinson Builders and is on track for completion in late-2027.

[smartcode_project:default project_id=135094 project_image_fid=341638]

The couple’s number one priority was to remain within easy commuting distance of the city for work. Murcia is positioned alongside the new Cross River Rail, with Woolloongabba Station just 300 metres from the front door.

They are currently living in their Annerley unit, which they have owned for several years, after recently moving out of their inner-city apartment, located on the very same street as Murcia.

“We had watched the development for a long time, and when construction activity began, that’s when we felt confident to buy,” Lois said.

[smartcode_project:default project_id=135094 project_image_fid=356540]

The timing also made sense. By moving back into their Annerley unit, they are able to save money ahead of settlement, while looking forward to returning closer to the city once Murcia is complete.

“We see Murcia as a forever home, as opposed to an investment, or something we need to appreciate massively in value and move on from in a few years,” Lois said.

“We secured an apartment large enough to grow a family, so we’re expecting to call Murcia home for a very long time.”

The couple plan to grow their family, but without the added maintenance demands of owning a standalone house further from the city. Working with Sarazin and architect HAL, they were able to slightly tweak the floorplan, converting the two-bedroom plus MPR layout into a functional three-bedroom apartment.

An added bonus was the recently revised communal space plans, which now incorporate a dedicated working-from-home area, complete with work pods, and shared desks.

“It means the third bedroom doesn’t have to become a part-time office and part-time bedroom,” Lois said, adding that residents have the benefit of working from home without actually being inside their apartment.

The rooftop wellness amenity was another standout compared to living in an established complex or a house. A signature feature of Sarazin developments, the rooftop will include a full gym, hot and cold plunge pools, a steam room and sauna, and a hotel-style pool with cabanas.

[smartcode_project:default project_id=135094 project_image_fid=214682]

Buyer journeys can vary significantly, from purchasing in the established market to buying new, or choosing between houses and apartments. Lois said they knew immediately that buying off the plan was right for them.

“We wanted something new, with less maintenance, and we weren’t quite ready to make the full financial leap straight away. The timing and deposit structure gave us the flexibility we needed.”

Designed by HAL Architects and inspired by the Spanish city of Murcia, the development takes a Mediterranean-influenced approach to architecture and landscaping, with a strong emphasis on shared spaces.

“The design feels considered, the amenities support how we actually live, and the location keeps us connected to the city without feeling right in the middle of it.”

Murcia is Sarazin’s second development in the area, following the completion of Silk One just up the road in 2022. They have several more projects coming to market in Woolloongabba ahead of the 2032 Brisbane Summer Olympics.

[smartcode_project_cta:default project_id=135094]

Joel Robinson

Close to the city, built for the future: Inside a growing family’s move to Murcia in East Brisbane

While most developers are aiming high across the Gold Coast, John Kearney’s <a href="https://www.apartments.com.au/developers/immerse-projects">Immerse Projects</a>&nbsp;has scaled back its plans for its Kirra Beach project.

As first reported by Apartments.com.au in April 2025, Immerse <a href="https://www.apartments.com.au/news/qld/first-look-immerse-projects-plan-new-apartments-at-kirra-beach">lodged plans for 105 apartments</a> on its 2,026 sqm Haig Street site.

The developer has now revised the proposal, reducing the 14-storey building to nine storeys and cutting the total number of apartments from 105 to 65.

The new scheme will also feature a broader mix of apartments. It will comprise 23 two-bedroom units, 17 three-bedroom units, and 25 four-bedroom apartments, the latter a configuration that was not included in the original proposal.

<img alt="Lot 11 C2859, 7 Haig Street, COOLANGATTA QLD 4225" data-entity-type="file" data-entity-uuid="972e3bbf-c3e6-4308-b098-5821e571f829" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Haig%20Street%20perspective%201.png?VersionId=3jkyNU0n7TW08DpkoEsY62bXWTb3UHxY" />

The building will rise to a compliant height of 29 metres, aligning with the Building Height Overlay.&nbsp;

The built form incorporates three basement levels accommodating 197 resident car parks and 13 visitor spaces, alongside storage and servicing areas. Level two is dedicated in part to communal amenity, including a lap pool along the western boundary, pool deck, spa and cold plunge pools, gym, work-from-home and meeting spaces, and landscaped areas designed to enhance privacy and outlook.

The typical floorplate will have eight apartments per level.

<img alt="Lot 11 C2859, 7 Haig Street, COOLANGATTA QLD 4225" data-entity-type="file" data-entity-uuid="002d2594-9cf4-4ee4-bb2a-9a0546ac1cc5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Haig%20Street%20site.png?VersionId=Qk.Cm0K9RziXrWu0Q4u2eOjEM3CwNhhC" />

The subject site is currently occupied by two 1970s-era walk-up buildings, Giraween and Caribbean, comprising 14 apartments.

Immerse Projects, led by building veteran John Kearney, who also heads construction firm Greyburn, has become increasingly active in the Kirra and broader southern Gold Coast market. The group recently completed Rhyhthm Kirra Hill on Garrick Street. They have another site locally, on McLean Street, which has approved plans for 58 apartments.

First Look: Immerse favours four-bed apartments in Kirra Beach switch

The development wave is continuing in the affluent suburb of Woollahra following last year’s planning reforms introduced by the Minns Labor Government.

In early 2025, the NSW Government implemented significant changes to its Low and Mid-Rise Housing Policy, altering planning controls to allow greater density for new apartment projects within an 800-metre walking distance of stations and town centres in the Woollahra Local Government Area, overriding existing local controls. Buildings are now permitted to rise up to six storeys within 400 metres of a station or centre, or eight storeys where affordable housing is incorporated, and up to four storeys within the 401 to 800 metre radius, which can increase to six storeys with affordable housing.

Since then, a significant number of development applications have been lodged, and numerous sites have transacted, some at record highs, with the increased density provisions now working in favour of developers.

Lower North Shore developer Abadeen are behind the latest project. They are planning a six-storey residential building at 101–115 Edgecliff Road, on the border of Woollahra and Bondi Junction.

<img alt="First Look: Lindos Group plans six-storey adaptive reuse apartment project in Woollahra’s Fletcher Precinct" data-entity-type="file" data-entity-uuid="17a75a04-3ecd-4b0f-af9f-54514690721b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Edgecliff%20DA%20front.png?VersionId=r0MiKualBGqKrjVj6hJZHsEiwl9QzF0D" />

The proposal would replace a trio of interwar flat buildings on the amalgamated 1,514 sqm site, which has three street frontages to Edgecliff Road, Adelaide Street and Australia Lane.

Importantly, as noted in the documents, the project represents a 200 per cent increase in bedroom density, from 32 bedrooms to 66, rather than a significant increase in the number of apartments, which will rise only slightly from 28 to 29.

The scheme proposes four one-bedroom units, 13 two-bedroom units, and 12 three-bedroom apartments. The submitted planning documents note that, based on market research and background analysis, one of the primary target markets will be downsizers seeking to remain in the local area while moving out of larger freestanding homes they no longer require.

“This allows for new housing supply opportunities beyond just the subject site,” the Design Report by architecture firm Squillace states. The current unit mix comprises 24 one-bedroom apartments and four two-bedroom units.

The top level of the new development will feature a rooftop deck with a pool, barbecue facilities, integrated seating, and a communal vegetable and herb garden.

“Providing these facilities is beneficial in encouraging increased interaction between occupants, which in turn fosters a greater sense of community,” Squillace’s report notes. The firm adds that the vegetable and herb garden, in particular, offers social value, with volunteering opportunities creating further interaction among residents.

<img alt="First Look: Lindos Group plans six-storey adaptive reuse apartment project in Woollahra’s Fletcher Precinct" data-entity-type="file" data-entity-uuid="9619b7bb-291d-417a-a006-f36d14a97cb1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Edgecliff%20DA%20perspective.png?VersionId=PYeMKcgOnEV7XVztARQ_YVDlvHcuyZaW" />

Squillace describes the intent as delivering additional housing supply while maintaining the heritage character of the Fletcher Precinct.

“Our objective is to design a high-quality benchmark building that enables considered additions and the adaptive reuse of the existing three brick residential flat buildings,” the architecture firm states.

The site is located within a heritage conservation area, with all three existing buildings identified as contributory items in the Woollahra Development Control Plan. Rather than pursuing wholesale demolition, the proposal retains the primary brick façades and tiled pitched roof forms along Edgecliff Road and Adelaide Street. New upper-level additions are set back from the existing parapets and articulated with horizontal and vertical shadow lines to provide visual separation.

“The proposed design seeks to retain the primary brick façades and roof forms to the street, demonstrating how existing building fabric can be preserved while increasing housing density within conservation areas,” the report adds.

Prior to Christmas, around <a href="https://www.apartments.com.au/news/nsw/rose-bay-apartment-market-fires-up-with-200m-in-new-developments-filed">$200m of new projects</a> were filed in Rose Bay alone, within the Woollahra LGA.

The suburb of Woollahra is subject to the most change in the Woollahra LGA, with the&nbsp;Minns Labor Government to deliver&nbsp;Sydney’s first new heavy rail station in more than a decade, enabling up to 10,000 new homes by rezoning land around&nbsp;<a href="https://www.apartments.com.au/developments/woollahra-nsw-2025" target="">Woollahra</a>&nbsp;and&nbsp;<a href="https://www.apartments.com.au/developments/edgecliff-nsw-2027" target="">Edgecliff</a>&nbsp;stations.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/next-stop-woollahra-train-station-delivering-up-to-10-000-new-homes-in-the-heart-of-sydney">Next stop Woollahra train station - delivering up to 10,000 new homes in the heart of Sydney</a>

First Look: Woollahra development wave continues as Abadeen plots six-storey apartment block

<a href="https://www.apartments.com.au/new-apartments/crest-broadbeach-13-armrick-avenue-broadbeach-qld-4218">Crest Broadbeach</a> continues to record strong sales momentum more than a year after the launch of second tower, reinforcing buyer confidence in the <a href="https://www.apartments.com.au/developers/morris-property-group">Morris Property Group</a> development as construction progresses on site.

The two-tower project on Armrick Avenue is now around 70 per cent sold. Around 90 per cent of the apartments in the first tower have been snapped up, with more than 40 per cent of sales achieved in the second tower since its mid-2025 release. With both towers now under construction and completion targeted for late 2027, Crest continues to attract buyer interest well after its initial launch.

The project’s sales success reflects Morris Property Group’s long-standing commitment to premium locations, delivery certainty, and apartments designed for long-term owner-occupiers.

[smartcode_project:default project_id=112024 project_image_fid=343113]

Crest occupies a rare position on Armrick Avenue, a leafy Broadbeach address that has seen minimal apartment development despite the suburb’s wider growth. The site overlooks expansive green space, including Broadbeach Park and the neighbouring bowls club grounds, offering leafy outlooks and immediate access to open space just moments from the beach.

That scarcity has been a key driver of urgency, particularly among buyers seeking a full-time coastal residence in an area where new supply opportunities are increasingly limited.

Delivery certainty has also played a central role. Morris Property Group is delivering Crest using its in-house construction team, with both towers being built concurrently, providing buyers with clear construction visibility at a time when confidence in project timelines has become a decisive factor.

The developer’s long-standing presence in Broadbeach has further reinforced buyer confidence. Crest is Morris Property Group’s ninth apartment development in the suburb since 2006, following recently completed projects such as Malo Broadbeach and with Maison Broadbeach currently under construction nearby.

[smartcode_project:default project_id=112024 project_image_fid=5430]

Pricing has also been carefully positioned relative to comparable beachfront and near-beach product. With two and three-bedroom apartments starting from $1.199 million, Crest has attracted both local downsizers and interstate purchasers seeking value without compromising location or build quality.

According to Apartments.com.au enquiry data, interest has remained broad-based, with Queensland buyers forming the core market and New South Wales accounting for around 20 to 30 per cent of enquiries since early 2024.

Apartments have been designed with owner-occupiers in mind, prioritising generous floor plans, practical storage, and low ongoing costs. Hybrid timber flooring, Bosch appliances, ducted air conditioning with condensers positioned away from balconies, and low body corporate levies, averaging around $90 per week for two-bedroom apartments, have resonated with buyers planning to live in the building long term.

[smartcode_project:default project_id=112024 project_image_fid=286005]

Resident amenity has been curated to support everyday use rather than short-term spectacle, with a gym, pool, barbecue facilities and landscaped outdoor spaces integrated into the development.

As broader market conditions continue to reward projects that combine location discipline with delivery certainty, Crest’s sales performance highlights where buyer demand is consolidating in Broadbeach, towards established streets, proven developers, and apartments designed for permanence rather than turnover.

[smartcode_project_cta:default project_id=112024]

Sustained sales momentum underpins demand at Morris Property Group’s Crest Broadbeach

<article data-scroll-anchor="true" data-testid="conversation-turn-4" data-turn="assistant" data-turn-id="request-WEB:2cd0935f-64f2-4642-8736-f0c056a17aa8-1" dir="auto" tabindex="-1">
South East Queensland developer SIERA has lodged a development application for a 27-storey residential tower on Chevron Island, marking its third project in the Surfers Paradise area and second within the island precinct.

Designed by Gold Coast-based BDA Architecture, the proposal comprises 130 apartments across a slender tower positioned opposite Chevron Island Park. The 1,518 sqm site at <a href="https://www.apartments.com.au/new-apartments/17-19-anembo-street-surfers-paradise-qld-4217">17-21 Anembo Street</a> sits at the western entry to the island and offers protected view corridors towards the Nerang River and hinterland.

According to SIERA Founder Brent Thompson, the design intent has been to create what he describes as “a Queenslander in the sky,” with a narrow floorplate to minimise overshadowing, maximise cross-ventilation and respond to the subtropical microclimate.

The podium has been articulated with layered materials and cascading landscaping to provide a transition between the park frontage and the residential tower above. A full-floor communal amenity level on level four will capture elevated park and river views, providing residents with wellness and recreation facilities in a private setting.

<img alt="Siera" data-entity-type="file" data-entity-uuid="7d1008c8-e1b5-4923-a568-29f356068e3f" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-02-16%20at%204.06.44%E2%80%AFPM.png?VersionId=p_0qI12aHgz3M8aHFbUoduXBOKDhcrqV" />

Thompson said the project continues the developer’s focus on Chevron Island, a precinct he believes has been “significantly underrated” but is now gaining broader recognition.

“The demand we’ve seen at Tapestry, nearing sell-out and completing later in 2026, confirms this is where Gold Coast residents want to live,” he said.

“It offers something rare: quiet neighbourhood character with wide, tree-lined streets, genuine local amenity, cafes, quality restaurants, medical services, daily necessities, and excellent connectivity to the light rail, beaches, river and HOTA, without feeling touristy or transient. As one of only two true island residential communities on the Gold Coast with limited development opportunity, this will become one of the coast’s most coveted addresses for those seeking a genuine residential lifestyle.”

Chevron Island has undergone steady evolution in recent years, benefiting from its proximity to HOTA and improved connectivity to Surfers Paradise and the light rail network. Thompson described the location as presenting “a unique window of opportunity”, noting that while buyer activity is strong, “pricing hasn’t yet caught up to comparable locations.”

“For buyers who understand the precinct’s trajectory, particularly its proximity to HOTA and the cultural activation happening there, this represents compelling value,” he said.

Apartment configurations will comprise two- and three-bedroom layouts targeted primarily at local owner-occupiers. Thompson said the homes are designed for “practical living,” with natural light, cross-ventilation and generous outdoor spaces central to the planning approach.

“We’re not chasing volume,” Thompson added. “We’re focused on delivering projects in the right locations for genuine owner-occupiers. Chevron Island offers an incredible combination of lifestyle, connectivity and value that we believe is significantly underappreciated in the broader Gold Coast market.”

The Anembo Street proposal follows SIERA’s 113-apartment Tapestry development on Chevron Island, currently under construction and due for completion in 2026. The developer recently completed Pipis in Bilinga and is preparing to commence construction on <a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a 54-apartment project in Northcliffe, Surfers Paradise, in the second quarter of 2026, with 40 per cent of apartments reportedly secured ahead of its formal launch.

SIERA operates as a vertically integrated builder-developer, managing acquisition, design, sales and construction in-house.

“We’re builders at heart who develop exclusively for ourselves,” Thompson said. “We don’t build for others; we refine what we do for our residents and owners. That focus allows us to control and oversee every detail, every communication, every interaction with stakeholders from neighbours to owners to council. We’re relentless in pursuing thoughtful design for practical living.”

Pricing for the Anembo Street project has not yet been released and remains subject to development approval. The application is currently under assessment by Gold Coast City Council. If approved, construction is anticipated to commence in late 2026, with completion targeted for 2028.
</article>

First look: SIERA doubles down on Chevron Island with new tower plans 

Low Interest Rates

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The Reserve Bank has warned there was a risk that low interest rates could lead to "over-exuberence" with asset prices, including in the housing market.

The RBA suggested Australian banks' lending standards remained prudent and that households, businesses and banks were well-placed to deal with any weakening economic conditions.

But the central bank warned of a risk that assets could be pushed beyond their fundamental value.

"A sustained period of rising asset prices may lead to over-exuberance ... with increased risk-taking and leverage in an environment of accommodative financial conditions," it noted in its biannual financial stability review, released on Friday

“A correction in asset prices, if borrowers’ income were to fall and so they defaulted on debt repayments, would expose lenders to large losses on the increased debt, particularly if the quality of that debt had been eroded.”

The review also noted households and businesses that derive their incomes from sectors most heavily affected by the COVID-19 pandemic face an elevated risk of repayment difficulties "if their buffers prove to be insufficient.” 

The RBA said these risks were greatest for leveraged assets, including housing, which thereby meant it was crucial banks did not cut credit standards.

"[In this environment] it is particularly important that there is no excessive risk-taking by the financial sector," the RBA said.

"Even if lenders do not weaken their own settings, increased risk-taking by optimistic borrowers could see a deterioration in the average quality of new lending."

"This would weaken the resilience of businesses and households, and so the financial system, to future shocks," the RBA concluded.
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The RBA suggested that Australian banks' lending standards remained prudent

jchancellor

RBA warns on "over exuberance" in home buying

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Homestar Finance is offering the lowest two-year fixed rate in the home loan market. Homestar Finance has cut its two-year fixed owner-occupier rate by 14 basis points to 1.74%.

The rate cut move knocks Westpac from the top spot after it offered the lowest rate. The increased rate competition was dubbed a "raging rate war" by the Mortgage Professional Australia website.

“This loan is the lowest two-year fixed rate on the market and also the lowest overall home loan rate available nationally,” RateCity research director Sally Tindall told The Australian. “It also has one of the most competitive revert rates at 2.24%.”

Some 450 fixed mortgage rates have been cut over the last two months. Homestar is also equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

Greater Bank has the lowest fixed rate in the market, with its one-year fixed rate sitting at 1.69%, with the rate only available to customers in New South Wales, Queensland and the Australian Capital Territory.

<h2>Recently listed properties:</h2>

[smartcode_project:default project_id=27728]

[smartcode_project:default project_id=27783]

[smartcode_project:default project_id=29048]
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Homestar is equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

New low as Homestar Finance cuts its two-year fixed owner-occupier rate to 1.74%

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Heritage Bank will offer variable rate home loan rates from as low as 2.54% after announcing cuts to its rates last week.

Heritage has reduced selected rates for new loans across its owner occupier and investment range from making it more attractive for prospective borrowers to take out a loan with Australia’s largest customer-owned bank.

Heritage has dropped its Discount Variable home loan interest rate to 2.54%, for eligible borrowers taking out a new owner occupier loan of $150,000 - $699,999 with a loan to value ratio equal to or less than 70%. 
  
Other rate reductions for new owner occupier loans include:

<ul>
<li>Selected Discount Variable loans reduced by 0.09%</li>
	<li>Selected Home Advantage Variable loans decreased by up to 0.19%</li>
</ul>
There is also news for investors with further rate cuts for new loans as follows:

<ul>
<li> Investor Discount Variable loan rates reduced by up to 0.14%</li>
	<li> Investor Home Advantage Variable loan rates cut by 0.14% - 0.24%</li>
</ul>
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Heritage has dropped its discount variable home loan interest rate to 2.54%

jordan_55689

Heritage Bank cuts variable home loan interest rates

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The Reserve Bank could seek tightened lending standards if the current record low interest rates triggers a housing boom, according to a RBA document obtained by Nine Entertainment.

While not the official position of the central bank, the research paper found low interest rates, along with the RBA's quantitative easing program, were supporting assets including the prices of houses.

It noted higher asset prices could translate into increased spending by "credit-constrained households".

"Housing prices are likely to (increase) alongside other asset prices," it suggested.

The research paper noted loan-to-valuation ratios were increasing but were still well below the levels that prompted APRA to tighten lending standards progressively from 2015.

It raised the spectre of borrowers "likely to be in negative equity".

The paper said the Council of Financial Regulators (CFR) - the RBA, APRA, the federal Treasury and the Australian Securities and Investments Commission - would intercede if required.

"Australia’s financial regulators will monitor and control risks," the paper noted.

"CFR will act if needed."

The document obtained under Freedom of Information date back to late November considerations by the RBA.

The paper cites previous research by RBA economists that a permanent percentage point reduction in official interest rates can drive up real house prices by 30 per cent over a three-year period. 

A "temporary" percentage point reduction would push up real prices by 10 per cent.

The central bank has cut official interest rates by 1.15 percentage points since last June.
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The document obtained under Freedom of Information date back to late November considerations by the RBA.

Reserve Bank may seek tightened lending standards if record low interest rates triggers housing boom

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ME is going below 3% p.a. on its variable rate Basic Home Loan with cuts of up to 59 basis points.
ME’s lowest variable rate for new customers will become 2.58% p.a., one of the most competitive comparable rates in the market – and the lowest advertised variable rate the bank has ever offered.
New and refinancing owner occupier customers paying principal and interest with a minimum loan balance of $150,000 are eligible.
ME General Manager, Home Lending Andrew Bartolo said ME’s Basic Home Loan was already very simple, with no frills or fancy features and no ongoing account keeping fees.
"Cutting variable rates below 3% p.a. for this product will make it even simpler and better value for our customers.”
As an example, eligible customers with a 20% deposit can apply for the 2.58% p.a. variable rate (a 59 basis point reduction) and those with a 5% deposit can apply for the 2.99% p.a. variable rate (a 53 point reduction). The headline rate changes are as follows:
 
<table class="x_MsoTableGrid" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" width="302">
Product
</td>
<td valign="top" width="85">
Previous Rate % (p.a.)
</td>
<td valign="top" width="76">
Change % (p.a.)
</td>
<td valign="top" width="132">
New Rate % (p.a.)
</td>
</tr>
<tr>
<td valign="top" width="302">
Basic Home Loan variable rate owner occupier – principal and interest (new and refinancing customers)
</td>
<td valign="top" width="85">
 
</td>
<td valign="top" width="76">
 
</td>
<td valign="top" width="132">
 
</td>
</tr>
<tr>
<td valign="top" width="302">
LVR 80% or less
</td>
<td width="85">
3.17
</td>
<td width="76">
-0.59
</td>
<td width="132">
2.58
</td>
</tr>
<tr>
<td valign="top" width="302">
LVR more than 80% (LMI applies)
</td>
<td valign="top" width="85">
3.52
</td>
<td valign="top" width="76">
-0.53
</td>
<td valign="top" width="132">
2.99
</td>
</tr>
</tbody></table>
 All changes are effective from 28 August 2020. Only applications submitted on or after this date will be eligible for the new rates.
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j.ballantyne1990-6AQqhLzZaK

ME offers lowest ever below 3% no-frills variable home loan

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RBA STAFF DISCUSSION PAPER
Most of the cumulative 75 basis points of cash rate reductions in 2019 has flowed through to mortgage rates paid by households.
Interest rates on outstanding variable-rate housing loans have declined by almost 70 basis points (Graph 11). Following the reductions in the cash rate in 2019, lenders lowered their SVRs on housing loans by an average of 60 basis points, which automatically flowed through to all variable-rate loans.
The average rate paid on outstanding variable-rate loans declined by more than this, reflecting strong competition for new high-quality borrowers as well as households switching away from interest-only loans (which generally have higher interest rates). Following the 25 basis point reduction in the cash rate in March 2020, the major banks have lowered their SVRs on housing loans by 25 basis points.
Rates for fixed-rate housing loans have also declined. Over the past year, the major banks reduced their advertised 3-year fixed lending rates by around 100 basis points for owner-occupiers. This decline was consistent with a similar decline in interest rate swap rates, which are often used as a benchmark for pricing fixed-rate loans (given that they reflect expectations about the future path of the cash rate). 
<div><img src="https://www.rba.gov.au/publications/bulletin/2020/mar/images/graph-0320-4-11.svg" alt="Graph 11: Variable
					Housing Interest Rates" width="620" height="482" data-imagetype="External"></div>
Interest rates on loans to large businesses – which tend to move with BBSW rates – are estimated to have declined over recent months and are at very low levels (Graph 12). Lending rates for medium and, to a lesser extent, small businesses have also decreased over recent months. 
<div><img src="https://www.rba.gov.au/publications/bulletin/2020/mar/images/graph-0320-4-12.svg" alt="Graph 12: Business
					Lending Rates" width="620" height="482" data-imagetype="External"></div>
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Housing and business lending rates both reach historic lows: RBA discussion paper

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EXPERT OBSERVER
Developments since the RBA rate cut on Tuesday 4 June have provided us with further confidence that our forecast for three rate cuts in 2019 will prove accurate. Firstly, the Governor has pointed to an ambitious objective for the labour market, with an unemployment rate of 4.5% seen as necessary to bring inflation back to target. This is despite his own forecasts indicating a 5% result on the basis of two rate cuts. That challenge can certainly be interpreted as an expectation of the need to deliver more than just two rate cuts.
Our earlier discussion on 24 May around our target cash rate of 0.75% emphasised downside risks to the cash rate, but noted the difficulties in lowering the cash rate below 0.5% and providing some pass through to the general economy – except for the impact on the currency. We concluded that 0.5% could be the lower bound for the cash rate, although we are comfortable with our 0.75% target. The Governor considered international precedence and referred to the 0.25-0.50% seen in the US, UK and Canada, but did not indicate whether the same level would be effective for Australia.
The other significant development since the RBA meeting has been the disappointing GDP report for the March quarter. This again highlighted the key themes that have been most prominent in our consistent assessment that the Australian economy is likely to continue operating well below potential, namely weak household income growth, a cautious consumer and a turning point in the savings rate.
This report, showing that GDP growth was only 0.4% in the March quarter is likely to trigger a further downward revision to the RBA’s 2019 GDP forecast. Westpac has consistently forecast around 2.2% for GDP growth in 2019, while the RBA has recently lowered its forecast from 3% in February to 2.75% in May (2.6% to 1 decimal point), with a likely further downward revision in August.
We have also argued that it will be difficult to retain the 1.75% underlying inflation forecast for 2019 by August when, as we expect, the June quarter underlying CPI will print 0.4% for a total of 0.7% for the first half of the year. We think it will be important that when the RBA addresses these lower forecasts, it responds with a further rate cut in August and another one to follow in November.
There has been some speculation that the RBA may cut earlier in July. This is not our central view given the likely need to respond to these downward revisions in August.
Turning to the US, we have revised our federal funds rate profile to include two cuts of 25bps in September and December this year.
A key influence on this assessment is that a new variable has entered the US economic model – one labelled “political unpredictability”. This variable is certain to have a negative coefficient on any equation describing US investment decisions and general confidence. We believe that it is now so embedded in US business behaviour that even resolutions of the current trade controversies are unlikely to convince business that the coast is clear.
We expect the FOMC will be assessing current risks in a similar fashion, revising down central growth views, particularly around business investment and confidence, and widening the uncertainty bands around these views. Chair Powell has recently pivoted from his previous “patient” stance to one where he is prepared to act and it is likely that the FOMC are seeing this variable as part of their risk assessment.
At this stage, we are not franking market pricing by extending the rate cuts into 2020 as we expect some reasonable resolutions to the current crises to prevent a ‘worst case’ scenario, particularly for the US consumer. Failure to resolve these issues would lead to a considerable shock to household disposable income and household demand. That development, of course, would require further action from the FOMC than we are currently forecasting. In 2020, with the consumer remaining in reasonable shape, we would also expect the housing market, which has currently stabilised, to respond to this lower profile for interest rates.
With markets currently pricing in more extensive cuts than we are forecasting, we see little scope for further declines in US yields in 2019, and anticipate they will rise modestly through 2020.
Given that markets are still not fully pricing in our RBA view by the end of 2019 and are more aggressive on the profile for federal funds rate cuts, we are comfortable to retain our central forecast that the AUD drifts down to USD 0.66, albeit reaching that level in the first half of 2020 rather than late 2019.
BILL EVANS is the Chief Economist for Westpac
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RBA moves further towards two additional rate cuts: Bill Evans

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Interest in rock-bottom mortgages skyrocketed in the days following the Reserve Bank of Australia’s (RBA) cash rate cut, according to Finder.com.au.
Finder.com.au said, following the drop to an unprecedented low of 1.25%, borrowers are acting swiftly to take advantage of low-rate loans. Traffic to <a id="LPlnk461607" href="https://finder.us9.list-manage.com/track/click?u=cc5e9bce699fa1d71a67cf499&amp;id=ab42718692&amp;e=58cd8ffd03" target="_blank" rel="noopener noreferrer" data-auth="NotApplicable">home loan deals</a> on Finder jumped by 654% in less than 48 hours since the RBA announced the cash rate cut.
Furthermore, interest in variable rates on Finder grew by 564%, while there’s been a 369% spike in those looking to refinance. Graham Cooke, insights manager at Finder, said the uptick shows Aussies are becoming increasingly savvy with their finances. “This historically low rate will open lots of eyes to just how good the current offers are – and that’s the case for variable and fixed rates, alike.
So far, <a href="/expert-insights/finance/what-are-lenders-doing-following-the-june-rba-rate-cut-ratecity">22 lenders have cut rates</a> following the RBA’s decision and all indications are that more lenders will follow suit in the coming weeks. Home loan discounts following rate cut
<img src="https://www.urban.com.au/images/2019/6/6/Finder%20rate%20cuts.JPG" alt="">
While the Big Four all announced a rate discount the day of the RBA's decision, only two – CBA and NAB – will pass on the cut in full.  Many lenders had already reduced their rates in anticipation of the rate drop. 
According to Finder.com.au, in May, 49 lenders reduced rates on 778 different home loan products
Cooke said, "we know the RBA cut the rate in part to help stabilise falling property prices, but many experts are predicting another cut this year, if not two." “Rates have never been this low. If your current home loan has a ‘4’ or a ‘5’ in front of it, you could be getting a much better deal,” he concluded.
<img src="https://www.urban.com.au/images/2019/6/6/Finder%20big%204.JPG" alt="">
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Web searches on rock-bottom home loan rates skyrocketed after RBA rate cut: Finder.com.au

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GUEST OBSERVATION
Australian taxpayers won’t face a rise in taxes now that Treasurer Scott Morrison announced the government will not increase the Medicare Levy by 0.5% as planned. This was to originally fully fund the National Disability Insurance Scheme (NDIS).
This is on the back of strong company tax receipts stemming from companies using up carry-forward losses accumulated in the wake of the financial crisis.
Australian Bureau of Statistics data for 2016/17, released this week, showed tax revenue for the federal government (including taxes received from other levels of government and public corporations) increased A$19.4 billion (5.2%).
The averted tax rise will be welcome news for Australian taxpayers. It also wedges the Labor opposition.
They have said that the NDIS was fully funded on their watch. So now they are proposing a 0.5% tax rise on all incomes over A$87,000. That’s pretty close to full-time male average weekly earnings and comes close to capturing half of Australian households.
The federal budget on May 8 will no doubt have further goodies for voters in the run-up to the net election, which will be either this year or relatively early next year. As usual, we will be reporting directly from the budget lockup.
One of the central economic puzzles of the last several years has been persistently low inflation in all advanced economies, despite general economic recovery and falling unemployment.
This week’s Australian consumer price inflation figures revealed a 0.4% increase for the March quarter, and 1.9% for the last 12 months. The March quarter figure was below market expectations of 0.5%, and also the previous (December quarter) figure of 0.6%. Education prices were up 2.6% on the quarter, and health prices up 2.2% (or 4.2% for the year to March 2018).
This puts inflation still below the Reserve Bank of Australia’s (RBA) target band of 2-3%. That band, of course, has been in place since the early 1990s – beginning with this speech by then governor Bernie Fraser.
Numerous central banks around the world have a similar approach. The basic idea is that a central bank can build a reputation over time to commit to monetary policy such that inflation lies in the band.
Now there are pros and cons to this approach to monetary policy, and it has its critics. But that is another tale for another day.
Just assuming that inflation targeting is the correct objective, how is the RBA doing? Well, one small hitch in the plan is that inflation has been outside the band for a long time now (basically since 2014), as the RBA’s own figures show.
Given the level of unemployment in Australia, low wages growth, and stubbornly low inflation, the RBA probably should have cut rates further a fair while back. But they seem, probably rightly, terrified of further fuelling a potential housing bubble.
Meanwhile, the credibility of their commitment to the inflation target withers. If only the regulation of our banking and finance sector had been better for the last, say, decade or two.
Speaking of such regulation, RBA assistant governor Chris Kent gave a speech Tuesday about the important issue of interest-only loans. Kent’s speech was significant because it followed up on remarks in the RBA minutes about the same issue that I discussed in this column last week.
It seems that the RBA “house view” on interest only loans is as follows. There could be a problem but the Australian Prudential Regulation Authority (APRA) stepped in and the banks have voluntarily tightened lending standards recently. Also because the average household with an interest only loan has a buffer of savings, everything will be fine. Nothing to see here.
I hope the RBA’s conclusion is right, but I know for sure that the reasoning is not. It’s actually the marginal household’s financial position and behaviour that matters, not the average household.
The average United States borrower with an adjustable-rate mortgage did not default in 2007, 2008 or 2009. But these mortgages were a huge contributor to the financial crisis, along with subprime mortgages.
Kent dutifully laid out the risks from interest only loans, saying:
"Because there’s no need to pay down principal initially, the required payments are lower during the interest-only period. But when that ends, there is a significant step-up in required payments (unless the interest-only loans are rolled over)."
Indeed, unless they can be rolled over. Which they can’t now because of APRA and the banks finally doing something.
Now, prices (interest rates) on interest only loans have gone up as part of the bank response. This has led a bunch of folks to shift to amortising loans, where the principal of the loan is paid down over the life of the loan. So those borrowers who haven’t shifted to these loans already, really don’t want to.
Maybe they can’t afford to because of the increased repayments, that can jump 30% or more per month.
So what does happen? First Kent says many borrowers save ahead of time, expecting a rise in repayments. Yes, the prudent ones.
But how many non-prudent borrowers have there been in the Australian property market in recent years? Hint: a lot.
Kent also points to borrowers who seek to refinance their interest only loan. But banks don’t really want to, and APRA doesn’t want to let them. And who is going to be able to? The safer borrowers who did save and so don’t really need to avoid amortisation. The risky borrowers can’t refinance.
Kent says some borrowers will have to cut their spending. Chuckle, chuckle. And the final option is to sell their house.
Sure, no problem, unless lots of folks want to do that all at once. Then it’s a fire sale that detonates the housing market.
I really do hope we escape the interest only debacle unscathed. But if we do it will be pure, dumb luck, not a consequence of good design or sound regulation.
It definitely doesn’t justify the RBA’s house view in Kent’s concluding remarks that: 
"The substantial transition away from interest-only loans over the past year has been relatively smooth overall, and is likely to remain so. Nevertheless, it is something that we will continue to monitor closely."
<img src="https://counter.theconversation.com/content/95518/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">Perhaps a there should have been a little more monitoring before interest only loans got to be 40% of all loans and more than half of the loan book of one of our biggest banks.
Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-interest-only-loans-are-an-economic-debacle-that-could-bust-the-property-market-95518" target="_blank">original article</a>.
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Interest only loans are an economic debacle that could bust the property market: Richard Holden

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Interest rates remain a hot button issue for Australian consumers, the mortgage belt in particular.
Most recently, the weakening in sentiment in Jun-Sep last year highlighted once again just how sensitive consumers are to actual and prospective rate moves.
The period coincided with increased rates on investor and ‘interest only’ loans following macro-prudential measures from APRA. It also coincided with increased media speculation about the potential for a rate tightening cycle from the RBA. Headline sentiment slid about 4% through mid 2017, registering its lowest read for the year in Aug, with sentiment amongst consumers with a mortgage sinking to an 18mth low.
Notably, actual consumer spending also stalled flat in the quarter, showing that, against a backdrop of weak income growth, high debt levels and risking risk aversion, this sort of sentiment pull back can have an immediate impact on spending decisions.
Click here <a href="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/Housing-monthly-charts-2018-02-2.jpg" target="_blank">to enlarge.</a>
<img src="https://westpaciq.westpac.com.au/wibiqauthoring/_uploads/image/Housing_Pulse/Housing_Pulse_Bites/Housing-monthly-charts-2018-02-2.jpg" alt="">
We get a specific read on consumer views on interest rates from our biannual question on mortgage rate expectations. The Feb update shows consumers are less hawkish than in Aug last year. The simplest summary measure – the net % expecting rates to rise – declined to 65.1 from 68.2 in Aug, the highest level since Jun 2011, prior to the RBA commencing its current, extended easing cycle. The Feb read is still well above the 43.5 avg since we started running the question in 2010.
Allowing for a clear ‘upward bias’ to consumers’ mortgage rate expectations, history suggests the Feb expectations read is roughly consistent with a 10bp rise in mortgage rates over the next year.
That is a less hawkish view than both current market pricing (+23bps) and the average economist cash rate forecast (+16bps) despite both markets and economists lowering their near term calls on rates. Westpac Economics continues to expect no change in official rates over 2018 and 2019. However, the hawkish tilt to expectations suggests rate concerns will continue to be a dampening influence on consumers' housing market decisions.
Matthew Hassan is senior economist with <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
 
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