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The bursting of the bubble

The bursting of the bubble

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Date Published : Tuesday, May 13, 2008

The housing market has enjoyed somewhat of a boom over recent years. Many Australians have been able to buy a property and sell it for a major profit a couple of years down the line, as prices soared and mortgages were cheap.

However, times have changed. House prices are still growing, but growth is slowing. Meanwhile, interest rates are at a 12-year high and years of growing personal debt are stifling mortgage repayments.

But who is at fault for the current situation?

The Reserve Bank sets the interest rates and, as of March this year, they have been at their highest level for over a decade. High interest rates are, in turn, passed on by banks on to the variable rate home loan products and - as a result - consumers are faced with larger monthly repayments. More money going out every month means less to spend on potential homes, slowing the market down.

Meanwhile, research by the Daily Telegraph found that people in affluent suburbs paid much too much for their homes in the boom years and are now having to settle for a loss when the property is sold.

Several homes in the western Sydney area were sold for losses of more than 25 per cent.

However, the global credit crunch has meant banks are more weary about who they lend mortgages to in order to buy properties. This has meant that some people who had access to loans a few years ago do not have that access any more, limiting the scope for growth.

No matter whose fault it is, the housing market is slowing. And it will effect every homeowner in the country.

Find and apply online for the best loan deals.ADNFCR-1411-ID-18591312-ADNFCR

 

 

 

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