Further rate cuts by the Reserve Bank of Australia (RBA) will do little to stimulate growth in the country’s AU$1.25 trillion (S$1.57 trillion) mortgage market, according to a report by JP Morgan.
This month, the central bank slashed the policy interest rate by 0.25 percent to a three-year low of 3.25 percent. The minutes from its latest policy meeting also suggests that further cuts are likely.
However, stringent banking regulations and high levels of debt among Australian households are expected to keep housing credit growth at its lowest level in the next two years at least, said Scott Manning, Banking Analyst at JP Morgan.
The report revealed that the country’s mortgage lending growth in the three months to August dipped to 3.6 percent, its lowest level since 1976.
“We think that this status quo is likely to go until 2014,” Manning said.
RBA’s series of cuts is helping people pay their mortgage but it is doing little to stimulate growth. Even with the cuts, close to a third of those who purchased properties in 2008 now have little, or zero equity in their homes, said Martin North, Co-Author of the report and Principal of Digital Finance Analytics.
“Interest rates have come down but affordability hasn’t come down with it,” added North.
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