Property:Time to buy?

Home loan interest rates are likely to rise, but house prices are still “soft.”

The Reserve Bank acknowledges both trends, in its latest statement on monetary policy.

The big four banks, which have been eager to raise their home loan rates, to cover “increased” funding costs received further support from the Reserve Bank, today.

It reviewed continuing disruption in the European debt market and said: “these global developments have had an effect in Australia where there has been a step-up in the banks’ overall cost of funding relative to the cash rate.”

The Treasurer, Wayne Swan, has taken a different view, speaking instead of the big fours’ “huge profitability” and predicting a public outcry if they raise  rates.

The ANZ bank is expected to make a statement on its home loan rates later today.

Meanwhile, the Reserve Bank said: “The housing market remains soft, with turnover rates around the lowest they have been over the past two decades.

“ Nationwide measures of prices recorded modest declines over 2011, although there were signs of stabilisation in some markets at the end of the year,” the RBA added.

It noted also that building construction activity “remains subdued.”

The bank said this is, in part, due to “ the earlier pullforward of demand from the boost to first home buyer grants.”

However, the RBA said slower population growth, tight access to credit for developers and lowered expectations of capital gains, had also contributed.

It noted, too, that retail spending remains subdued, but said demand for services has been growing relatively strongly.