Mr ADAMSON - 1994-06-30
Given that fixed home loan interest rates are rising, can the minister tell us how these rises will affect those who have borrowed under the government's HomeNorth schemes?
ANSWER
Mr Speaker, this is a very good question, and I thank the member for it. There are concerns in the community at the upward pressure on interest rates with which the federal Treasurer is still playing King Canute. Yesterday, several banks increased fixed interest rates. Fortunately, at this stage, there has been no movement in variable interest rates. That is good news for Territorians who have borrowed money under the HomeNorth schemes. A movement in the fixed interest rate will not trigger any adjustment to interest rates under the HomeNorth schemes. The benchmark rate that is used by HomeNorth is the Commonwealth Bank variable interest rate and therefore there is no effect. I would like to give comfort to borrowers under the HomeNorth scheme. As members would be aware, the great majority of loans under that scheme are at concessional interest rates which are as low as 5% for both the HomeNorth Sales and HomeNorth Easy Start loans. Those interest rates are not in any way affected by the variable interest rate.
If the variable interest rate moves, it will affect the benchmark rate which is 8.75% currently. Borrowers at the top of the income scale for eligibility for HomeNorth, who are paying 8.75% now, would have their interest rates adjusted. The rate would remain the same for those on interest rates of 5%, 5.5%, 6% or 7%. Those concessional rates are adjusted only when Cabinet decides to vary them. The rates are determined on the basis of movements in the consumer price index and average weekly earnings in the Northern Territory. At the moment, if one has a 5% loan, the current
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estimate is that it will move to about 5.2% in about 12 months. That is the approximate effect of inflation and wage movements.
To ensure continued affordability, individual borrowers who have changed circumstances or suffer hardship have the opportunity to put a case in regard to their individual circumstances to ensure that their loans stay within the affordability level of 25% of income. Those issues can be assessed to consider whether there is justification for an individual's interest rate to be adjusted as a result of changed circumstances. The HomeNorth schemes do maintain affordability. They provide security, particularly for the home loans of low- to medium-income families, so that they do not suddenly face rapidly-ballooning home loan repayments in the event of a blow-out in variable interest rates. In any case, the fixed interest rates will not affect anybody's rate under the HomeNorth schemes.
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ANSWER
Mr Speaker, this is a very good question, and I thank the member for it. There are concerns in the community at the upward pressure on interest rates with which the federal Treasurer is still playing King Canute. Yesterday, several banks increased fixed interest rates. Fortunately, at this stage, there has been no movement in variable interest rates. That is good news for Territorians who have borrowed money under the HomeNorth schemes. A movement in the fixed interest rate will not trigger any adjustment to interest rates under the HomeNorth schemes. The benchmark rate that is used by HomeNorth is the Commonwealth Bank variable interest rate and therefore there is no effect. I would like to give comfort to borrowers under the HomeNorth scheme. As members would be aware, the great majority of loans under that scheme are at concessional interest rates which are as low as 5% for both the HomeNorth Sales and HomeNorth Easy Start loans. Those interest rates are not in any way affected by the variable interest rate.
If the variable interest rate moves, it will affect the benchmark rate which is 8.75% currently. Borrowers at the top of the income scale for eligibility for HomeNorth, who are paying 8.75% now, would have their interest rates adjusted. The rate would remain the same for those on interest rates of 5%, 5.5%, 6% or 7%. Those concessional rates are adjusted only when Cabinet decides to vary them. The rates are determined on the basis of movements in the consumer price index and average weekly earnings in the Northern Territory. At the moment, if one has a 5% loan, the current
Page 35
estimate is that it will move to about 5.2% in about 12 months. That is the approximate effect of inflation and wage movements.
To ensure continued affordability, individual borrowers who have changed circumstances or suffer hardship have the opportunity to put a case in regard to their individual circumstances to ensure that their loans stay within the affordability level of 25% of income. Those issues can be assessed to consider whether there is justification for an individual's interest rate to be adjusted as a result of changed circumstances. The HomeNorth schemes do maintain affordability. They provide security, particularly for the home loans of low- to medium-income families, so that they do not suddenly face rapidly-ballooning home loan repayments in the event of a blow-out in variable interest rates. In any case, the fixed interest rates will not affect anybody's rate under the HomeNorth schemes.
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Last updated: 09 Aug 2016