StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Rises of Interest Rate is Affecting the Housing Affordability - Essay Example

Comments (0) Cite this document
Summary
Australians have always aspired to own their own homes. Either it is the first homeowners or those who want to switch from their existing owned homes to newer, bigger, better homes, a common practice is to take out a bank loan. This loan is sanctioned on certain conditions…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91% of users find it useful
Rises of Interest Rate is Affecting the Housing Affordability
Read TextPreview

Extract of sample "Rises of Interest Rate is Affecting the Housing Affordability"

Download file to see previous pages As the interest rates rise, the mortgage payments amounts also escalate. This poses as an unfavourable situation for the homebuyers, and causes a decline in the housing affordability. Empirical evidence suggests that this has been the case in the years whenever the interest rates rose. When such is the situation, the homebuyers can be offered such financial products by the banking sector that they can conveniently make the home buying decision, thus supporting the housing affordability.
The huge majority of Australians desire to own a home and housing assets form the leading fraction of wealth for a good number of Australians. Australian house prices have been mounting discordantly in recent times. This price growth has been well in surplus of average weekly earnings growth over the same period, and as such the ratio of house prices to average earnings is now soaring.
The Australian property market is basically comprised of many markets of separate sectors and geographical locations. This is the fact that must be considered as many various forces may contribute in shifting prices in separate markets, and the overall Australian property market's price gains or falls may disguise the actual micro market price shifts.
Residential housing is determined by two markedly separate sources of demand; owner-occupiers and owner-investors. Both sources of demand are determined by diverse (but connected) aspects and the payback that accrues to the owner can take a collection of shapes depending on their standing. Payback can be the accredited rent that owner-occupiers get hold of by living in a house, or it can be the takings resulting from renting out an investment property or it can be (in both cases) the capital gain that is realised upon selling of the hothirty percent of income.
The level of nominal interest rates and their rate of change are major determinants of the demand for home finance, along with levels of consumer confidence. (http://www.dhw.wa.gov.au/housingstrategywa/hswa_finance.pdf)
Affordability of access and servicing of payments becomes an increasing issue as interest rates rise. Any rise in interest rates is probable to upset borrowers with diminutive equity and make it further difficult for would-be first homebuyers.
Simply speaking, housing finance is the system of money and credit that works to offer housing affordability. In that sense, it is quite similar to finance for any other shape of investment. The established level of interest rate also affects the demand for and supply of home finance. The customary economic conditions very much affect the interest rates, over which the housing sector has very little control.
Research Questions
Aims and Purpose
This research paper will aim to provide an insight to the effect of a rise in interest rates on the housing affordability of Australia. The close link of these two aspects, that is the interest rate levels and the housing affordability will be proved and the various other driving forces will be identified. The historical data and figures will be used to establish the empirical trend. In addition, why such a link exists and what are the reasons that the housing affordability is connected to the prevailing levels of interest rates will be illustrated in this paper.
Objectives
This ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Rises of Interest Rate is Affecting the Housing Affordability Essay”, n.d.)
Rises of Interest Rate is Affecting the Housing Affordability Essay. Retrieved from https://studentshare.org/miscellaneous/1530684-rises-of-interest-rate-is-affecting-the-housing-affordability
(Rises of Interest Rate Is Affecting the Housing Affordability Essay)
Rises of Interest Rate Is Affecting the Housing Affordability Essay. https://studentshare.org/miscellaneous/1530684-rises-of-interest-rate-is-affecting-the-housing-affordability.
“Rises of Interest Rate Is Affecting the Housing Affordability Essay”, n.d. https://studentshare.org/miscellaneous/1530684-rises-of-interest-rate-is-affecting-the-housing-affordability.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Rises of Interest Rate is Affecting the Housing Affordability

Interest Rate SWAPS

According to Pelsser (2000) the market related to derivative securities has been stated to be perceived similar to an insurance market in relation to the considered financial risks. The rapid rate of globalisation in terms of the capital markets has resulted in a significant rise in the level of volatility related to interest rate across the globe. Numerous companies displayed a preference in favour of purchasing insurance in opposition to the rising improbability and instability with regard to the market linked to interest rate. Owing to this particular rationale, the market related to interest rate derivatives witnessed a sharp rise and development during the past two decades (Crotty & North Carolina State University, 2006). It...
8 Pages(2000 words)Literature review

The Rate of Interest

...1a) the rate of Interest: This is one of the most basic approach by which the government regulates money supply in the economy. Ceteris Paribus, An increase in the rate of interest will make people save more and spend less because they think that their money is earning high rate of interest. Similarly, an increase in the money supply increases the cost of loans and people spend less. This reduces the money supply in the economy. Similarly, when interest rates decrease the exact opposite happens and money supply in the economy increases. 1b) Open-Market Operations: In this method, the sale and purchase by central bank in the security market has desired effect on the money supply in the economy. For e.g. an increase in the purchasing...
2 Pages(500 words)Essay

Profits hit by rate rises

Article Profits hit by rate rises The aggregate expenditure curve shows the relationship between the aggregate planned expenditure and the real GDP. The aggregate planned expenditure carries two components of autonomous expenditure as well as induced expenditure and the analysis of the curve therefore take into account the impacts of both the components of aggregate planned expenditures.
In theory, aggregate planned expenditure is always equal to the real GDP and there is a direct relationship between the two however deviations can occur in this relationship when the differences between the actual versus planned expenditure emerge. (McEachern, 2006) This difference however, appears in the form of inventories which start to accu...
2 Pages(500 words)Essay

Equitable Interest in the Property and the Land Law

On a preliminary basis, it would appear that due to the provisions of the Land Registration Act of 2002, Neville will have no claim on the estate at all, since his interests have not been registered and the title was vested only in Harry, Ton and Hermoine – all of which was transferred to Hermoine and then to the new owner, Draco.

However, in the case of Re 139 High Street, Deptford2, it was established that there had been a mistake in the conveyancing transaction and that one annexe on the property actually did not belong to the registered owner, who was the legal owner of the land. The owner of the annexe then asked for the register to be amended and this was done accordingly, in recognition of his interest beca...
6 Pages(1500 words)Case Study

Importance and Changes in the Level of Interest Rates to Banking and Insurance Sector in the UK

Indicatively, Ahiakport (2003, 42) noticed that “interest is compensation for the use of capital; not necessarily money”. Moreover, the above researcher mentioned that in general “quantity of money determines the supply of liquid resources, and hence the rate of interest, and in conjunction with other factors (particularly that of confidence) the inducement to invest” (Ahiakport, 2003, 55). In other words, interest rates are related to the capital both directly and indirectly. The direct relation refers to the increase of capital under the influence of specific interest rates, while the indirect relation can be assumed by the ‘attraction’ of foreign funds in a particular country due to high-inte...
14 Pages(3500 words)Term Paper

Different Models of Exchange Rate Determination and Their Empirical Support

Specifically, some of the discussed models of exchange rate determination are the balance of payment approach model, the monetarist or asset approach model, and the martingale-random walk model. Moreover, the paper will also integrate the experiential observations and examples during the paper, in order to understand the practicality of these models.

Under the balance of payment approach, the domestic cost of foreign currency is established like the cost of any other article of trade. In other words, the market demand and supply curvatures are intersected in the exchange market for that particular foreign currency. The modeling of the abovementioned approach related to the demand and supply for foreign exchange is quite...
13 Pages(3250 words)Term Paper

Exchange Rate Policy in the Gulf States

... in oil prices, many Gulf States have been pursued to adapt to the flexible exchange rate regimes because of rising inflationary pressures as well as bringing in more structural reforms into such economies in order to improve their long term sustainability. (Times, 2007). Further, many analysts are also indicating the recent movements in the oil price as one of the most critical reasons for bringing in the changes into the exchange rate regimes in GCC countries as most of the OPEC members believe that the mismanagement of US economy and weakening dollar against major currencies of the world is a cause of concerns as revenues continue to dwindle despite maintaining adequate supply in the market. (Feldman, 2008). This research paper...
6 Pages(1500 words)Literature review

Factors Affecting Leadership Effectiveness

...Factors Affecting Leadership Effectiveness A study on the factors that affect efficient leadership is an important one for any organization. The reason for this is that leadership is dependent on individuals who manage the said organizations and that these individuals are very different from each other. Even when there are existing literature that shows the characteristics of good leaders, not all people can emulate these characteristics because of the fact that they are indeed different from each other. These literature then are just guidelines and it clearly depends on the leaders to follow these or form their own strategies on how to best lead their own organizations. The contention of this paper is that even when...
7 Pages(1750 words)Literature review

Factors Affecting the Development of Healthcare Organization

... with the nature of state budget. Social forces capable of affecting the development of this clinic are mainly made up by cultural values, norms, traditions, and societal trends of the community it serves. Keeping a consistent record of changing values, attitudes, preferences, and population statistics is also important to provide quality care. The state of local economy can hugely influence a clinic’ progress. Unstable economy, poor income rates, and rise in unemployment can all exert negative economic influence on the development of this clinic. Poor income forms a potential socioeconomic factor as the mortality gap between rich and poor, highly educated and poorly educated people has widened over the recent years. Income imbalances...
6 Pages(1500 words)Assignment

Macro and Microeconomics Factors in the UK Housing Market

The housing industry is divided into residential, commercial and industrial segments. Economists define supply in terms of service units, that is, a physical unit can be deconstructed into the services that it helps provide. These housing unit services are considered as an unobservable theoretical construct. Housing stock depreciates making it qualitatively different from a brand new constructed building.
The owner, user/owner and renter comprise the demand side of the housing market while the renovators and developers comprise the supply side of the market. In order to implement the simple demand and supply analysis to the housing markets, several modifications have to be made to the standard microeconomic procedures and ass...
8 Pages(2000 words)Research Paper

Factors Affecting Fast Food Restaurant Selection in Britain

Over the years, fast food has become the most preferred food for consumption because of its availability, affordability, and easy way of making them despite the health consequences associated with it. As much as fast food joints are available in almost any location in Britain, consumers tend to apply several factors before selecting a fast food that they can eat from depending on their preference and the affordability of the food sold in these establishments. According to Thomson (1994), most of these establishments tend to be on strategic places such as in the motor service station, high streets and shopping centers that become tempting for consumers and influence their selection.  Essentially, customers seek to acquire a ce...
11 Pages(2750 words)Research Proposal

How Climate Change Is Affecting the Winter Olympic Games

...How Climate Change is affecting the Winter Olympic Games How Climate Change is affecting the Winter Olympic Games Introduction The Winter Olympic Games are a leading global sporting event that is organized once every four years(Müller, 2014). The first Winter Olympics was held in 1924 in Chamonix, France. Unlike the Summer Olympics, Winter Olympics sports are practised on snow and ice. Originally, the sporting event featured five sports, namely Nordic skiing, skating, ice hockey, curling and bobsleigh. Thereafter, the event occurred every four years until it was interrupted by World War II. It resumed in 1948. Until 1992, the event was held in the same year as Summer Olympic Games. However, a 1986 decision of the International Olympic...
7 Pages(1750 words)Assignment

Sexual Interest in Children

The question of what happens to the cases has attracted the attention of many people calling for massive research in the field.
The many people with no information are a clear sign of abrasion that children go through unnoticed. With regard to capacity building and awareness on sexual harassment, 95% believe there no satisfactory programs aimed at enhancing the ability of children to recognize and report sexual related cases. In this light, 80% believe the inclusion of sex education plays an important role in stimulating and enhancing children’s cognitive ability. On the other hand, others think the inclusion of such programs exposes children to bad things that corrupt their morals. Notably, 60% are on the view that se...
7 Pages(1750 words)Assignment

Housing Affordability in Los Angeles

...Housing Affordability in Los Angeles (LA) Affiliation: Introduction Despite the fact that the economy is continuously improving, the majority of the American workers are still facing huge struggle when it comes to meeting ends meet. The millions of households experience problems with housing costs, which accounts for more than half of the household’s monthly income. These costs end up putting pressure and extreme stain households, hence living too little for taking care of other necessities like food, transport, and health care. Los Angeles remains to be largest major metro for any person to buy a home, which requires over nine years of earnings. LA has been experiencing rising housing problems due to the limited housing supply (Los...
6 Pages(1500 words)Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Rises of Interest Rate is Affecting the Housing Affordability for FREE!

Contact Us