High interest rates burden Australians
Australian homeowners hard hit by rising interest rates may get some help from proposals being considered by their government in the next few weeks.
Loans for home buyers, though held by government policy below general interest rates, have increased by almost 3 percent in 14 months, to about 13 percent. That has meant a $66-a-month increase in payments on the average loan of $30,000 Australian ($33,700).
The increased interest rates have occurred alongside huge increases in house and land prices in most major cities in Australia. In three years the median price of houses sold in Sydney, Australia's largest city, have increased from $ 47,000 to $83,000 and in subtropical Brisbane from $29,000 to $45,000. However, increases have only been from 15 to 20 percent over that three-year period in most other major cities.
But it has been the increased interest payments rather than prices that have caused most difficulty. The increase has led to the formation of homeowner groups to lobby politicians and has caused considerable concern to the federal government.
The media have highlighted the problems of young people on low-to-moderate incomes being forced out of their homes by the rising interest bill. However, the number of such cases have been small, and large increases in wage rates have to some extent solved the problem of increased payments on mortgages.
Nevertheless, the federal government is under pressure from all sides to bring in some measures to ease the impact of the higher interest charges and to prevent any further increases.
Among the measures to be considered by the government are a direct subsidy for mortgage payments and tax deductibility of interest payments on houses. Also being considered are increased grants to new home buyers to help bridge the deposit gap between loans available and the total cost of a house.
Federal Treasurer John Howard has taken a strong stand against scheme to make interest payments tax deductibe, arguing that while such deductions are available in the US there are no taxes on capital gains or property in Australia.
The government does not want to be pressured into making an early decision because it believes the problems caused by higher interest rates have been exaggerated.
To some degree the ''wait and see'' approach has paid off. Although interest rates have not declined, one of the effects of big interest rates has been to reduce the pressure on housing prices. For the past six months, for example, Sydney housing prices have remained stable.