& more people are borrowing before the next rate rise. I find it hard to believe but ..............
Borrowing boom to hit rates November 28, 2003 - 8:05PM
Borrowing rose at the fastest pace in nearly a decade in the weeks leading up to this month's interest rate rise, setting the seal on expectations of a second hike next week.
Reserve Bank figures showed home borrowing leapt 2.1 per cent in October to take annual growth to 23.1 per cent, the highest since 1994 and just short of the all-time record of 23.3 per cent.
Economists said the figures justified the central bank's concerns about rapid credit growth, which it cited as one of the reasons for the first interest rate hike in 17 months.
UBS chief economist Scott Haslem said the 4.2 per cent rise in home borrowing in September and October was the strongest two-month gain in almost 24 years.
"Today's data reveals a further acceleration in private sector credit growth, particularly for housing," he said.
"While preceding last month's rate hike, against the backdrop of a strengthening domestic economy and improving global outlook, today's data likely further heightens the RBA's desire to quickly return monetary policy to a neutral level."
Private sector borrowing overall rose by 1.6 per cent in October, taking annual growth in this sector to 14.7 per cent, the highest in 14 years.
Personal credit, including credit cards, grew 1.1 per cent, while business loans rose by 1.2 per cent.
While the November rate hike took many economists by surprise, a raft of banks are tipping another rise next week.
ANZ Bank, the Commonwealth Bank, Westpac Bank, Citigroup, AMP Henderson, UBS, Credit Suisse First Boston and Royal Bank of Canada all said the cash rate would move to 5.25 per cent in December.
An improving global economy, tightening labour market and today's credit growth figures all pointed to a December rate hike, they said.
Another rise would add $30 to monthly repayments on the average $189,100 home loan, with at least one more 0.25 percentage point hike expected by mid-2004.
Official figures confirmed the strength of the domestic economy, with higher share prices boosting the assets of managed funds by $22.7 billion, or four per cent, to $671.4 billion.
Superannuation funds' assets rose three per cent in the September quarter, to $78.6 billion.
But the federal budget took a sharp turn for the worse, plunging to a $4.24 billion deficit by the end of September after a $337 million surplus the previous month.
