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Affordability improves but credit a concern

Staff Reporter 4 minute read

The first improvement in housing affordability since early 2007 is good news for the broking industry but there are fears that a further slide in maximum LVRs could hurt borrowers.

The Real Estate Institute of Australia (REIA) Housing Affordability Report released today showed the percentage of household income required to meet loan repayments decreased by 0.7 per cent over the third quarter to 38.8 per cent.

The improvement in affordability reflects the September 0.25 per cent RBA rate cut and bodes well for the impact the subsequent one per cent October and 0.75 per cent November reductions may have on borrowers.

Mark Haron, principal of Connective, said improved affordability levels were good news for the market.

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“We should see activity improve a little; the next few quarters should be quite reasonable with a decent recovery to occur probably in the second half of 2009,” he said.

Mr Haron said affordability was likely to continue to improve as stressed sales pushed down prices in some markets and lower interest rates made repayments more affordable for borrowers across the board.

But while better affordability should see borrower activity increase Mr Haron cautioned that credit availability would be a major influence in a broader market recovery.

Mr Haron warned that a widespread reduction in loan to value ratios would be detrimental to the market.

“The critical factor will really be access to capital,” he said.

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ANZ recently capped its LVR at 90 per cent while CBA has cut its LVR limit to 95 per cent.

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ANZ 90pc LVR cap concern for industry 20-11-08

Affordability improves but credit a concern
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