After the promising figures from August and September’s Housing Finance Statistics which seemed to indicate First Home Buyers were making their way back to the market – figures from October record a drop. Is the recent interest rate cut going to be enough to tempt First Home Buyers back to the housing market – or are we out for the near future? What does this mean for those people with bad credit?
OCTOBER KEY POINTS
VALUE OF DWELLING COMMITMENTS
October 2012 compared with September 2012:
The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 1.1%. Investment housing commitments rose 2.2% and owner occupied housing commitments rose 0.5%.
In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.8%.
NUMBER OF DWELLING COMMITMENTS
October 2012 compared with September 2012:
In trend terms, the number of commitments for owner occupied housing finance rose 0.6%.
In trend terms, the number of commitments for the purchase of new dwellings rose 4.0%, the number of commitments for the purchase of established dwellings rose 0.5%, while the number of commitments for the construction of dwellings fell 0.9%.
In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 18.7% in October 2012 from 19.4% in September 2012.
With experts predicting a rise of at least 3%, October’s rise of only 0.1% has meant many are predicting further cuts will be needed. The RBA cut the cash rate to three per cent at its December board meeting last week.
Australian Broker reports more on this:
“The Reserve Bank is relying on the housing sector to pick up in 2013, following an expected peak in mining investment. But economists are now saying they may need to cut the cash rate further in order to stimulate growth the housing sector,” their recent story said.
Macquarie chief economist Richard Gibbs said weakness in the number of home loans indicated a continued lack of confidence among would-be homeowners.
“This data is a lot more spotty than we had expected,” he was reported as saying in Business Spectator yesterday.
“While the value of lending commitments is up, the number of loans remains weak, reflecting a wider lack of consumer confidence in Australia.”
However, investors seem more confident with the market – the value of investment home loans rose 14 per cent over September and October.
CommSec chief economist Craig James said in Business Spectator there were a number of factors boosting investor confidence – reportedly the strongest back-to-back gains in more than five years.
“Investors conclude that migration is rising, rental markets are tight and home prices are rising – a compelling mix of factors pointing to higher property returns,” he said.
Buyer confidence and bad credit
When lending criteria is tight, what happens to people who have bad credit? When they are refused a mainstream loan because of bad credit, but market confidence is high – when it is moving up – they may want to get into a loan at a higher interest rate in order to take advantage of an increasing market. This comes at a price though – a whopping $15,046.57 or more in additional home loan repayments over the first three years of their loan. But if the market is going up rapidly – they may see it as a viable option.
When confidence is low, when the market is static, they may not be so keen – they may simply choose not to buy.
Some reports suggest as many as 3 million Australians are living with bad credit. How many of these people would like to buy a home in the next 5 years? Many of the people that currently have negative listings on their credit file may be living with bad credit history unnecessarily. Rather than miss the opportunity to buy because there is no urgency to buy, because they would rather save that $15,000 – there is another option – to actually assess whether they would be suitable to repair their credit rating.
To find out how more people can remove their bad credit history – opening doors to lenders that were previously unavailable – contact MyCRA Credit Rating Repair.
Click on the link to this short video to find out how a professional credit repairer can help you or if you are a broker, your clients:
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