Caution has been the reaction by homebuyers in the lead up to the announcement of the Federal Election to be held on 24 November.

 However a number of issues including the election could be the cause for homebuyers holding off purchasing a home. Those issues include interest rates, debt markets, sub-prime loans and the potential for a change of government.

 The slowing down of mortgage sales was confirmed in Your Mortgage which reported on findings of leading mortgage broker aggregator the Australian Finance Group (AFG) which showed that, “Mortgage sales across the country sank 21.2% in September month on month as worried buyers delayed their foray into the property market. The past two years have recorded an 8.5% weakening of mortgage sales during September, with this year’s figures showing that overall sales continued to plummet by 21.1%-two and have a half times the established seasonal average.”

 Despite speculation about interest rates Australia has enjoyed fairly stable interest rates over the last fifteen years. It is considered that this is due to the deregulation reforms of the Hawke/Keating Government. The Reserve Bank, which operates independent of the government, sets the cash rate, which is the rate that determines the mortgage rate, that banks charge. The Reserve Bank is mindful of the need to control inflation, which is a major factor in their setting of the cash rate. Governments indirectly affect interest rates from the effect their policies have on the economy and in particular any inflationary elements. In the current election there seems very little difference in the polices of the major parties when it comes to the economy. It would therefore seem most unlikely that we would see any major movements in interest rates as a result of a change of government, which would be a good outcome for homebuyers.

 The First Home Buyers Grant, which is long overdue for an increase will be a matter of particular interest to first homebuyers during the election campaign. The First Home Owners Grant should be increased to make it relative to the cost of a home in 2007. The current First Home Owners Grant of $7,000 was established 1 July 2000 in conjunction with and to offset the introduction of the GST. A strong case could be made to at least increase the grant in line with the CPI. The questions for the first homebuyer are do we wait or buy now as prices may rise by the time any increase in the grant if increased becomes available.