Relief For Some Buyers

LAST week home financier St George Building Society combined with the Housing Industry Association to offer an interest rate of 13.4 per cent to home buyers who purchase a house from an approved member of the HIA.

Under the joint scheme home buyers, who either build a house or purchase an existing unoccupied new house from a HIA member participating in the scheme, will be offered the capped market rate for the first year of their mortgage.

The scheme, designed to resuscitate the embattled building industry and flagging property market, is the latest in a wave of special deals offered by major financial institutions as competition in the new home market heats up.

HIA chief executive Remo Nogarotto said it was anticipated that the special arrangement with St George would "kick start" the housing construction industry which had been affected by high interest rates and the general economic downturn.

"Now people wanting a new home have the best scheme at the lowest rate on the market," Mr Nogarotto said.

St George Building Society spokesman Steve Cookson said the new TBE (To Be Erected) scheme was aimed at stimulating the construction of new properties through the lowest variable rate since early 1988.

Mr Cookson said that unlike most housing incentive schemes, the TBE scheme was not exclusively targeted at first-home buyers.

He said the scheme was also not a land-house package which required home buyers to build or purchase in a designated housing estate to be eligible for the cheaper interest rate.

"A lot of the participating builders have blocks of land or houses they've already built but you can have land anywhere in NSW and still be eligible," Mr Cookson said.

Under the scheme, after the first year of the mortgage the standard St George variable rate, currently at 15pc, will be enforced.

Mr Cookson said more than 80 per cent of the funds loaned out by St George were for first mortgages on residential properties.

He said an advantage of a capped interest rate, unlike a fixed interest rate, was that the interest rate could not rise but it could drop lower if the standard variable rate dropped below 13.4pc in the first year of the mortgage

Among the participating HIA builders are Huxley Homes, Long Homes, Clarendon Homes, Jade Homes, Wincrest Homes, Australian Housing and Land, Meriton Apartments, Walker Corporation, Jandson Homes, Pioneer Homes, Michael Hull & Associates and Shereline Constructions.

Mr Cookson said home buyers who contracted HIA members who were not participating in the scheme to build their homes would not be eligible for the TBE scheme but would be offered an interest rate of 13.9pc for the first year as an incentive to build rather than buy an existing property.

"One of the main aims of the scheme is to keep the building industry in NSW going by maintaining building activity and jobs," Mr Cookson said.

"If people are buying and selling existing houses it doesn't stimulate that sector of the economy.

"We think it's very important to provide new housing so we don't have periods of no availability which tend to squeeze up house prices, not to mention rentals, and keep people from entering the market," he said.

Mr Cookson said normal lending criteria, including a valuation and standard loan application fees of $200 for the first $50,000 and $3.50 for every additional $1,000, will apply to borrowers.

Ms Susan Moxham, from the HIA, said home buyers had an enormous range of house plans and house prices to choose from.

She said some builders could be prepared to be flexible by building a house designed by the home buyer but that "anything different" would likely cost more than a standard project house.

"Clearly, if you start to ask for something out of the ordinary it's going to cost more," Ms Moxham said.

"It's unusual for people to come along with their own plans as most home buyers, particularly first-home buyers, like to keep costs to a minimum."

Ms Moxham said incentive schemes generally attracted first-home owners.

"In this economic climate people who already own a home are reluctant to move on until they've got job security and the economy is stable," Ms Moxham said.

"A lot of people took on debt in the boom period and have no incentive to move on in a market which has shrinking prices unless they are forced to because they can't service the debt," she said.

The national executive director of the HIA, Dr Ron Silberberg, said Bureau of Statistic figures revealed that private houses, which were the most interest-rate-sensitive sector of home building, had recorded a 2.5pc rise in October.

He said the national upturn in new home sales in October pointed to a further improvement in the level of private house building over coming months

Recent levels of approvals indicated that housing starts in NSW were running at an annual level of 40,000 which would see the State leading the housing recovery.

"Dwelling approvals provide signs that the housing industry has levelled out and is about to turn the corner," Dr Silberberg said.

A wave of special deals for home buyers have been offered by other major banks in recent months as lenders are forced to follow suit to try to retain market share.

Last July the State Bank of NSW combined with the HIA in a six-month scheme called Mortgage Busters which offered a five-year, fixed-interest rate of 13.9pc to new house and land buyers at a time when the bank's standard fixed home rate was 15.5pc.

The scheme, which expires on January 20, involved 13 member builders of the HIA and a group of property developers offering land in Penrith, Windsor, Menai, Minchinbury, Pymble and St Ives.

Last week the State Bank of NSW lowered the rates applicable to its five-year, fixed-interest home loans to 14pc and cut its standard variable rate on housing loans to 14.5pc-half a percentage point below variable mortgage rates offered by the four major banks.

Managing director of the State Bank, John O'Neill, said the new variable rate meant customers with a $100,000 loan taken out over 25 years would see monthly repayments fall by $57.

The ANZ Bank recently reported a seven-fold surge in lending after it introduced a five-year fixed-interest mortgage rate of 13.5pc two weeks ago.

ANZ's chief manager of public affairs, Ms Sue McCarthy, said around 80pc of the business was coming from non-ANZ customers, indicating the threat low-interest rate schemes offered to other lending institutions.