First-home buyers grant 'misguided'

With the housing bubble well and truly burst, Kevin Rudd’s efforts to reinflate it with the first-home buyers grant spell trouble for home loan providers and borrowers alike, the Sydney Morning Herald has warned.

First-home buyers have become the most active borrowers in the home loan market since the grants were introduced in October and their enthusiasm has encouraged the Reserve Bank of Australia (RBA) to make a series of interest rate cuts to entice more first-timers into the market.

However, with the prospect of job losses on the horizon, the paper claimed: "With the tempo of interest rate cuts now slowing – and one of the big four banks this week signalling a rise in its fixed interest rates – this puts many borrowers in a highly vulnerable position."

Many experts are now predicting that the RBA will avoid making any further interest rate cuts when it meets again in May.

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