The Reserve Bank of Australia (RBA) increased the official cash rate by 25 basis points to 0.35% at today’s board meeting.
This is the first cash rate hike in more than a decade and comes after core inflation grew by 3.7% over the year to March – well above the RBA's 2-3% target.
With the latest inflation data, it shows that Australia had recorded the highest quarterly and annual increase in more than two decades.
The last time the RBA increased interest rates was in November 2010. The official cash rate has been at a record low of 0.1 per cent since November 2020.
Mortgage holders have been warned to prepare for a double rate rise. The cash rate is largely expected to jump by 1 per cent by the end of this year and reach 1.25 per cent next year.
Lenders are likely to lift mortgage rates in line with the cash rate increase, which may result in big changes to variable home loan repayments.
Reach out so we can review your home loan.
Mortgage brokers were responsible for 66.5% of all new home loans in the December quarter, according to the latest data from research group Comparator.
That is not only a record for a December quarter, it's also a significant increase on the market share brokers recorded in December 2020 (59.4%) and December 2019 (55.3%).
Mike Felton, the CEO of the Mortgage & Finance Association of Australia, said the strong increase in mortgage broker market share shows that consumers really value the service, competition and choice that brokers provide.
When you visit a bank for home loan advice, the bank will only tell you about its own products, even if it knows another lender is offering a better home loan.
But when you visit a broker, the broker will compare interest rates, loan features and borrowing criteria from a range of lenders. The broker will also negotiate with lenders on your behalf. That significantly increases your chances of getting a great loan that’s tailored to your unique circumstances.
When it comes to classifying debt as either ‘good’ or ‘bad’, borrowing to fund your education or buy a property are generally regarded as good debt, because both tend to deliver a return on investment.
However, you might not realise that taking on HECS-HELP debt can make it harder to qualify for a home loan and reduce your borrowing capacity.
That’s because, if hundreds of dollars per month are being diverted from your salary to repay your student debt, that means you have less money to devote to mortgage repayments.
So does that mean you should repay your HECS-HELP loan as soon as possible?
Maybe yes, maybe no. On the one hand, eliminating your student debt could make it easier to get a home loan. On the other hand, student debt is interest-free (although it does increase in line with inflation), so it might be better to repay other interest-incurring loans first.
Give me a call if you want to know the best approach for your situation or your child’s situation.
Buying a typical house will now cost you almost 30% more than buying the typical unit.
CoreLogic has reported that, at the end of February, Australia's median house price was 29.8% higher than its median unit price – a record gap.
To put it in dollar terms, median prices are $791,400 for houses and $609,800 for units, which means the gap is almost $182,000.
That gap has significantly widened in the past two years:
On the other hand, it’s also possible the gap will narrow, because with houses looking relatively dear and units relatively cheap, demand might shift from the former to the latter.
The official data confirms what you might’ve heard anecdotally – property investors are very active right now.
Property investors took out $33.7 billion of home loans in January, according to the Australian Bureau of Statistics, marking the second consecutive month in which investors set a borrowing record.
To illustrate how investment activity has surged in recent times, investors borrowed 67.8% more in January than the year before.
This increase has occurred throughout the country, with investment activity increasing by:
That means most property investors are finding it easy to secure quality tenants. It also gives many investors the chance to raise rents, because demand for rental accommodation is so high right now.
The supply chain shortages that have affected so many industries have hit property as well, with residential construction costs rising at the fastest annual rate since 2005.
Home building costs rose 7.3% in the 2021 calendar year, according to CoreLogic’s Cordell Construction Cost Index (CCCI).
That said, the pace of growth might be trending down, with costs rising 3.8% in the September quarter but only 1.1% in the December quarter.
Part of the reason costs are rising is because builders are struggling to get their hands on materials such as timber and metal products.
Property developers and home builders are likely to be passing on at least some of these increased costs to people buying homes.
First home buyers can now save their deposit even faster, after the First Home Super Saver Scheme savings threshold was increased from $30,000 to $50,000.
The scheme lets first home buyers salary-sacrifice pre-tax income into a dedicated account within their superannuation fund – up to $15,000 per year and now up to $50,000 in total.
There are two ways in which the First Home Super Saver Scheme benefits first home buyers.
First, the money they deposit into the scheme is taxed at 15% rather than the income tax rate, which is 19% for someone earning up to $45,000 and 32.5% for up to $120,000.
Second, when first home buyers eventually withdraw their money, they’re allowed to withdraw their original deposit plus about 4.7% interest, which is a higher rate of interest than they’d earn through a regular savings account. Withdrawals are generally taxed at the marginal tax rate minus 30 percentage points.
Home loan activity reached a record high in December, according to the latest data from the Australian Bureau of Statistics, in a sign the property market remains strong.
Australians committed to $32.8 billion of mortgages in December, which was 4.4% higher than the month before and 26.5% higher than the year before. The breakdown was:
One reason so many Australians are entering the market is because it's been booming over the past year.
Another is that despite speculation that interest rates might increase later this year, rates are at ultra-low levels and would still be very low even with a rate rise.
Today, celebrating International Women’s Day, with these wonderful, inspiring, supportive women, and a perfect opportunity to celebrate all that we do as not only mortgage brokers, but as friends, sisters, and mothers. 🧡
As a woman, running a business, leading from the front, today made me realise that I need more days like today.
What I think many might be surprised to know, is that of the many mortgage brokers I know, is that we are not in competition, there are many clients who value what we do, and in fact, we are often support and collaborate to ensure that not only we continue to grow and evolve as brokers, but also to ensure that we are all focussed on the success of our clients and support each other in our endeavours.
We are a community, and a fiercely proud, brave, and driven community of strong women at that.
Proud to be one of every day, but especially today on International Women’s Day. 🧡
There's a house building boom going on right now, partly because of the now-concluded HomeBuilder incentive and partly because interest rates are so low.
Building work started on a record 149,345 new detached houses in the year to September 2021, according to the latest data from the Australian Bureau of Statistics.
If you’re planning to build a new home, please note that financing residential construction projects is more complicated than getting a standard home loan.
Lenders require more paperwork – all the usual documents, plus a copy of your building contract, building plans and building specifications, as well as quotes for any additional work you might be planning.
The way lenders pay out the loan is also more complicated: instead of giving the money in one lump sum, they distribute it in five ‘drawdowns’ as the build reaches key milestones.
If you want to build a new home in 2022, give me a call – I can talk you through your options
Rachael Bland – Founder & CEO