Awaiting Reforms could cause Economic Downturn
Loan demands could cause downturn while waiting for the new banking laws from the federal government especially the confirmation of the abolition of mortgage exit fees. Many economists expect a more flexible lending terms over the next few months. Home loan rates last November jumped by 40 basis points on average.
The awaiting reforms are expected to axe all exit fees on home loans which will take out from July 1, 2011 was said by Treasurer Wayne Swan to help increase banking competitions. But there is no justification yet for any lender to have a mortgage exit fee as this could be unfair and not be tolerated. This also aims to prevent price signaling between banks and opens up new types of quick cash loans to enable better access to instant cash.
Joe Hockey believes that reducing of these exit fees may sounds great for consumers but these will surely be hit in other ways such as higher maintenance fees or higher application fees. It is because banks are not so willing to accept a fee being abolished without making any replacement for income with something else.
Stephen Roberts, a chief economist of Nomura Australia believes these pending reforms can make existing homeowners and first-time buyers hesitate about a new home loan. These could influence demand for new products relative to sitting on the existing products. This was agreed by Brian Redican, a senior economist of Macquarie Research. He stated that these could dampen house prices as demand slackens. It sounds like a consumer is better off waiting before he put his house in the market.
Over 15% of loans like cash advance loan or cash advance payday loan was granted last October and the smallest amount was in July 2004 as first-time buyers remained hesitant to enter market before November.
The Reserve Bank Governor Glenn Stevens still believes that the recent years give more competitions in banking industry than was in the mid-1990s. He said that the government has adequate finance to purchase housing. He refused to comment on the measures of the awaiting reforms but had a quick consultation the treasurer’s department.
