Interpac Business and Migration Solutions Melbourne Australia

 (April 9, 2010)

SURGING property prices appear to be driving a spending spree in Australia, with home owners taking out bigger mortgages to help fund the purchase of big-ticket items, from new cars to holidays.

While many struggle to get a foothold in the housing market, home owners buoyed by double-digit rises in property prices are increasingly using their homes as ATMs.

Regulators and economists fear that the borrowing binge could leave home owners vulnerable to rising interest rates, while any sudden reversal of housing prices might tip many into negative equity - when the size of the loan exceeds the value of the property.

Before this week's 25-basis point rise in interest rates, Reserve Bank governor Glenn Stevens took the unusual step of appearing on breakfast television to say that property prices were ''getting quite high'' and warn of the dangers of people taking on too much mortgage debt.

Mortgage refinancing hit a record high of 37.2 per cent of all home loans arranged in March. Fujitsu Consulting executive director Martin North said there had been a significant jump in the proportion of those refinancing to help finance acquisitions ranging from shares to big-ticket consumer items. ''That's one of the reasons why the RBA is twitchy about where house prices and the housing market is going,'' Mr North said.

Figures from RP Data show house prices in capital cities have risen by 12.7 per cent over the past year. Coinciding with these figures, new car sales hit a monthly record in March, led by consumer-focused sports utilities and luxury vehicles. Meanwhile, the high Australian dollar is also encouraging Australians to travel overseas in record numbers.

(Source from:theage.com.au)