St George Bank has fired the first shot in what could be a rate war for housing finance in the wake of the figures from the Australian Bureau of Statistics showing a fourth month of easing levels of finance for home buying in November.
The bank said yesterday it cut almost a quarter of a per cent from the cost of its three year fixed rate.
The bank said yesterday that it had cut the interest rate on its three and five year fixed home loans to 6.95 per cent for a limited time for loans of $100,000 or more.
St George had been offering five year fixed loans with a rate of 7.15 per cent and its three year rate with a rate of 7.19 per cent. Its standard variable rate is currently 8.07 per cent.
The bank’s cuts came after the ABS reported that not only had housing finance levels fallen for a fourth month in a row in November but that the number of fixed rate loans for owner/occupied housing had risen sharply to total more than a fifth of all such loans in November.
This was after the Reserve Bank lifted interest rates a third time for 2006 in early November.
That’s the highest level of fixed rate loans in any month for at least eight years.
And with economic figures still showing a fairly robust economy, if not patchy in NSW and Victoria, St George is clearly trying to tap borrowers’ fears of another rate rise in the next couple of months.
The ABS said that “In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments decreased from 17.7% in October 2006 to 17.4% in November 2006.
“The number of fixed rate loan commitments as a percentage of total owner occupied housing finance commitments rose from 17.0% in October 2006 to 21.3% in November 2006. The average loan size for owner occupied housing commitments fell from $223,200 in October 2006 to $222,600 in November 2006.
“The number of owner occupied dwellings financed by banks (seasonally adjusted) decreased by 0.4% in November 2006 compared with October 2006, after a decrease of 0.2% in October 2006. The trend series fell by 0.7% in November 2006.
“The number of owner occupied dwellings financed by non-banks (seasonally adjusted) fell by 1.5% in November 2006 compared with October 2006, after an increase of 0.1% in October 2006. The non-bank trend series decreased by 0.6% in November 2006.”
So with non-bank housing finance slowing faster than that from the established offerors in November, St George clearly believes it is on to a good thing by launching a short, sharp price cut to try and reel in hesitant buyers.
St.George said in a statement that: “For a limited time the special 3 and 5 year fixed rate will be 6.95% pa for new loan applications of $100,000 and above received from Monday 15 January.
“These fixed rates are ideal for those customers who want the peace of mind and know exactly what their repayments are during the fixed rate period.
“St.George Head of Home Loans, Steve Blinkhorn said; “There is still some uncertainty around whether or not interest rates will continue to rise. We have seen an increasing trend over the last 3 to 4 months to fixed rates with customers choosing the peace of mind of repayments. By choosing a fixed rate, borrowers are protected in a rising interest rate environment and are able to budget for the future with confidence.”
The bank said the discounted rate will be available on the following products:
· Standard fixed rates
· Portfolio Loan fixed rates
· Low Doc fixed rates
· Low Doc Portfolio Loan fixed rates
· No Deposit fixed rates.
St George said “In addition, the special fixed rate can be used as portion of a split loan so customers can combine both the security and certainty afforded by a fixed rate loan with the flexibility of a variable rate”.
