Economic outlook may be positive

LOWER interest rates and growing consumer confidence will help stimulate the home finance market in 2012, says leading mortgage broker Loan Market.

Loan Market corporate spokesperson Paul Smith said the outlook for the coming year was more positive after some challenging economic conditions during 2011.

"The year ahead looks quite promising with the likelihood of interest rates continuing to head down and lender risk appetites growing," Mr Smith said.

"The Melbourne Cup day rate cut by the Reserve Bank of Australia was a turning point for the market and the follow up December reduction will help boost activity over the summer.

"The economic forecasters expect the RBA may have to cut again early in the New Year, which will be a relief for borrowers."

Mr Smith said 2011 had been one of the more difficult years for the home finance sector in decades.

"The natural disasters in Queensland and Victoria at the start of the year created some havoc in the market place as activity stalled while communities in both states focussed on recovering from adversity," he said.

"We saw many months of subdued consumer confidence as the carbon tax heightened the concerns over costs of living.

"There was a lot of speculation in mid-2011 about the RBA raising interest rates to combat rising inflation. But the financial situation in Europe and the United States eventually saw the RBA change course to try and boost consumer sentiment in Australia's two speed economy."

Mr Smith said despite uncertainty about the impact of measures to tackle the European debt crisis and how it will affect the funding capacity of the Australian banking sector, consumers are more upbeat than they were earlier in 2011.

"The fundamentals of the Australian economy remain quite strong and there are plenty of opportunities for the service, manufacturing and primary sectors to grow and succeed in 2012."

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