Home Loans

Commonwealth Bank (ASX:CBA) and Westpac (ASX:WBC) yesterday slashed their rates for fixed home loans after predicting that the Reserve Bank's next rate will go down.

The subprime mortgage crisis has created a credit squeeze. The credit crisis has led to increased costs of debt and the lack of investor interest to refinance existing debts, which lead to the collapse of RAMS home loans and also the recent end for packaged mortgages (also called securitisation). Higher interest rates are expected as non-bank lenders cannot offer home loans as a result of the credit crisis. Since non-bank lenders are out of the picture, the lack of competition means higher interest rates.

GE Money plans to put up mortgage lender Wizard Home Loans on sale. It has been attracting lot of criticism for accumulating debt and its insurance business practices. GE Money shall announce the sale on Wednesday at the New South Wales state franchisee meeting in Sydney.

"The Australian Bureau of Statistics said the total value of finance for houses dropped to $18.3 billion during the month."

For traders the ramifications In my opinion are minor - but it's nice to know. The economy doesn't rely on one indicator to tell us at what level it is. But in an economic sense it could be seen as a slowing down of the property market, and nothing more - perhaps a knock on effect that people are buying less houses could mean they are hesitant to or there's enough houses in the market... who knows? One can only speculate.