Owners, Renters Feel The Pinch

Sydney Morning Herald

Saturday March 8, 2008

Danny John and Jonathan Chancellor

THE increase in monthly mortgage repayments is exceeding the Reserve Bank's latest interest rate rise while Sydney's rental shortage deteriorates.

Westpac yesterday lifted its home loan rate by 0.3 of a percentage point to 9.27 per cent.

Westpac joined National Australia Bank in passing on to home buyers the extra costs that the banks are having to pay to borrow from international markets.

ANZ, Commonwealth Bank and St George are expected to follow in the next couple of days.

ANZ's chief executive, Michael Smith, said yesterday that the increasing costs of funding may result in credit rationing to home and business borrowers.

St George has said that home loans would have to go up by 0.4 percentage points if it was to cover its costs.

Yesterday's increase will add about $60 a month to repayments on a mortgage of $300,000. If the banks had stayed in line with the Reserve Bank, the amount would have been $50.

Westpac said it was "extremely mindful" of the effect on its borrowers but that it was absorbing a large proportion of the extra costs.

Jeremy Dean, acting head of the bank's retail banking business, said home loans could rise even further without prompting by the central bank if global pressures did not abate.

Meanwhile, Sydney's vacancy rate has dropped to 0.9 per.

"Every month the situation seems to get worse," said the Real Estate Institute president, Steve Martin.

"Now that the university year has started, the figures have gone back into freefall. I really feel for renters."

A vacancy rate of about 3 per cent indicates that there is a reasonable balance between supply and demand.

The big squeeze - Page 45