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Monday, 23 February 1987
Page: 414

Senator REID —My question is to the Minister representing the Minister for Housing and Construction. I refer the Minister to a survey by the Real Estate Institute of Australia which reveals the rapidly increasing burden of home mortgage repayments under the Hawke Government. Is the Minister aware that in just over two years since the last election average home loan repayments have increased in Canberra, for example, from $541 a month to $718 a month. Is it not a fact that the survey shows that the mortgage burden has increased at a much faster rate than have family incomes? Now that it is clear that last year's housing package has failed, and given that the bank subsidy expires in April, what action does the Government propose to relieve the plight of families which are facing the inevitability of even higher interest rates as they are trying to pay off their home loans?

Senator RYAN —The report indicates that mortgage funds remained readily available over the September quarter and on the whole were only marginally less affordable than in the June quarter. Prior to 2 April, the limited funds available at 13.5 per cent were strictly rationed. Without the 2 April package there would currently be no bank lending. The level of bank lending for housing for 1986-87 has increased from the $4 billion projected in April to $7 billion now.

The measures used in the report ignore significant structural changes in the way that housing finance is being provided. Since the introduction of the 2 April package, cocktailing of housing finance has disappeared. This has enabled prospective home buyers to borrow from one source only, and at one interest rate. This has led to an increase in the size of the average loan recorded by financial institutions. Total repayments under the new arrangements can be significantly less than for a cocktail loan. For example, $60,000 borrowed over 25 years at 15 1/2 per cent costs about $782 per month. A $60,000 low start loan at 11 1/2 per cent costs about $604 per month in the first year. A cocktail loan made up of $40,000 at 13 1/2 per cent over 25 years and a $20,000 personal loan at 18 per cent over 10 years would have cost $816 per month. So those figures indicate that, far from having failed, the package of 2 April brought forward by the Government to assist home loan borrowers has brought about substantial improvements.