Abandon Home Loan Ceiling, Govt Told

CANBERRA: A key housing industry group will put pressure on the Government this week to abandon the 13.5 per cent ceiling on home interest rates as part of a plan to restructure its housing package.

Industry sources said the Housing Industry Association (HIA) is seeking a meeting later this week with the Housing Minister, Mr West, to discuss a range of options.

One option involves the phasing-in of deregulation of home loans, including those by building societies. The plan would allow a year's breathing space from higher repayments for borrowers who were protected by the ceiling rate on loans made before the housing package was introduced on April 2.

The $140 million interest subsidy given to the banks as part of the package would be diverted to give low-income earners greater access to home loans and boost the First Home Owners' Scheme.

The HIA move came on the eve of a meeting in Melbourne today, at which the banks will decide whether to mount pressure on the Government to lift the rate ceiling on regulated home loans or boost its interest rate subsidy to avert rises in deregulated mortgage rates.

The meeting of the Australian Bankers' Association will focus on the concerns of some of the private banks - notably the National Australia Bank and Westpac- that a continuation of high commercial interest rates could erode their ability to lend for housing.

Senior officials earlier this month warned of possible home loan rate rises if commercial rates stayed high, attracting deposits away from the savings banks.

The figures released yesterday show the housing industry continued its slide in the June quarter, with a sharp fall in housing starts to their lowest level in three years.

The disappointing figures follow the dramatic cut in the number of dwelling commencements for 1986-87 predicted by the Government's key housing advisory body, the Indicative Planning Council (IPC).

The IPC on Friday revised downwards its estimate from 130,000 to around 120,000 starts this financial year.

The Bureau of Statistics figures show that, after adjustment for seasonal factors, the total number of housing starts fell by 12 per cent in the June quarter, the biggest quarterly drop since September 1974. The number of private sector housing starts fell by 8 per cent.

This is the third successive quarterly drop, reflecting the impact of the home loan drought which threatened an almost complete cessation of lending before the Government introduced its housing package.

Starts in 1985-86 at 136,610 were 11 per cent down on the record 152,210 in the previous financial year.

The June figures are likely to mark the bottom of the housing slump. Figures for home loan and building approvals, which give an earlier indication of a turnaround for the industry, have already shown some improvement in the wake of the housing package.

The Housing Minister, Mr West, said: "While the level of housing commencements in the June quarter was at an annualised rate of only 117,200, the figures for the first quarter of 1986-87 should indicate a turnaround in activity.

"The outlook for housing is encouraging. However, the precise level of commencements depends upon the future level of general interest rates and their effect on housing rates."

The Opposition housing spokesman, Mr Beale, described the figures as disastrous and predicted a drop of one-fifth in private sector home building this financial year.