 Home sales affect interest rates
New home sales have fallen 4.5 per cent in September meaning that the Reserve Bank of Australia will now more than likely limit the November interest rate rise to 25 basis points.
The Melbourne Cup Day rate decision is being closely watched, with predictions that the rise could be as much as 50 basis points now being watered down. Housing Industry Association data out today shows that the gradual withdrawal of government grants for new home buyers is having an effect, as this decline in sales follows an 11.4 per cent rise to 19-month highs in August.
Harley Dale, chief economist at HIA says the industry saw a burst of sales in August from first home buyers.
Detached home sales were down 4.3 per cent in September, while apartment sales fell 6.5 per cent.
CommSec chief economist Craig James says these figures serve as a "welcome reality check".
"The Reserve Bank needs to tread warily with rate hikes until it can establish the true state of the Australian economy. We tip at most a 25 basis point increase next Tuesday," he said.
When the Reserve Bank meets on Tuesday, financial markets now tip a rise of 0.25% to the official rate. And it is expected that most lenders will pass on this rate increase to home owners.
Following last month's increase of 25 basis points all major banks passed on the increases to mortgage rates.
A rise of 25 basis points on a $300,000 mortgage amounts to an extra $45 per month to repayments.
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