Housing debt puts pressure on rates
Australians are borrowing 10 times the amount of money for housing as they were 15 years ago, emphasising the pressure on the Reserve Bank to lift interest rates. In 1986-1987, Australians borrowed $15 billion for housing, while in the year to July 2002 the figure stood at $151 billion for buying, building and refinancing homes. Annual lending for housing was 5.6 per cent of GDP in 1986-1987, jumping to 21 per cent in 2001-2002.
During the 15-year period, house price in capital cities have trebled. Low interest rates over recent years have both encouraged the housing boom and protected home buyers from rising mortgage repayments. Household interest bills actually fell to $26.3 billion last year, from $28 billion.
Most analysts now believe that the Reserve Bank will raise interest rates over the next six months by a quarter of a percentage point, but BIS Shrapnel's Robert Mellor warned yesterday that rates could go up by as much as three percentage points by 2005.