Home loan demand set to fall

Demand for home loans will fall in the coming year, according to a report

Market Intelligence Strategy Centre (MISC) found that the value of all new home loans would fall by an estimated $14.4 billion in the 12 months to September 2010, representing an 8.8 per cent decline on the same period a year earlier, the Australian Associated Press (AAP) reports.

The MISC study said such a fall was due to rising interest rates following the RBA’s recent decision to lift the cash rate to 3.75.

Variable interest rates increases across the major banks have encouraged bank customers to compare home loans.

MISC told the AAP that the fall in demand "will reflect a slower return of investor lending and still strained funding, which will restrict small-lender activity, as well as further rate increases".

A recent report by Canstar Cannex for the Australian advised bank customers preparing to switch home loans to be wary of the charges that banks levy for leaving a mortgage. It said that such charges should be weighed up against the savings that could be made from lower interest rates.

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