Author: Comparable

Buying a home for the first time can be challenging, especially with house prices soaring in recent years. So could switching from house hunting to unit searching be the way forward for you?

There’s no denying that getting into the property market in today’s economic climate ain’t easy.

The average Australian house price is now $725,000 – that’s 30% more expensive than the average national unit price.

Compare the price gap to September 2021, when the national median house price was $570,000 – just 9.6% higher than the median unit price of $520,000.

But is opting for a unit the right move for you?

Today we’ll look into the pros and cons of buying an apartment for your first home.

Affordability, lifestyle and location

First the pros: units are usually more affordable than houses.

Median capital city house prices have grown 31.6% in the past five years, while units have only increased by 9.8%.

Lower prices can not only make it quicker for you to save a deposit for an apartment, they could also make you eligible for better stamp duty concessions (either reducing your stamp duty bill or eliminating it entirely, depending on your state or territory).

And while a unit may not always have space to accommodate future expansions to your life and family, they are often located in thriving local community hubs with amenities, shops, and transport on your doorstep – great for young families still wanting to be in the thick of the action.

Potential for investment

Admittedly, owning a house can have advantages over owning a unit.

For starters, you don’t have to fork out for body corporate fees. And the capital growth you can gain from owning the plot of land your abode sits on often makes house ownership more attractive.

But buying a unit – rather than holding off until you can afford a house – also offers investment potential.

By purchasing a unit, you’re investing and building up your own equity, rather than paying off someone else’s mortgage if you’re renting.

So while you may not be able to buy the house just yet, an apartment can provide a valuable stepping stone to reaching that goal.

And should you be in a position to hang onto your unit when you upgrade to a home, you may get some decent rental income – if you buy in the right spot.

On top of this, unit upkeep can be easier because those body corporate or strata fees go towards various maintenance activities.

Other affordable options

All that said, if apartment living isn’t for you, there are other cost-effective options for you to explore.

You could consider searching slightly further afield, with recent research identifying “sister suburbs” that are up to 200% cheaper than their in-demand neighbouring suburbs.

Rent-to-own arrangements could also make it easier for you to crack the market. These arrangements enable tenants to buy the property they’ve been renting once the lease ends, at a previously agreed price.

And whether you’re in the market for a house or a unit, there are government schemes that can help you fast-track home ownership and save.

The federal government has three low deposit, no lenders mortgage insurance (LMI) schemes available for eligible first-home buyers, regional first-home buyers, and single parents.

Eligible buyers can purchase a home with a deposit as little as 5% through the First Home Guarantee and Regional First Home Guarantee. While the Family Home Guarantee assists eligible single parents and guardians to buy with a 2% deposit.

Not paying LMI can save you anywhere between $4,000 and $35,000 – depending on the property price and your deposit amount.

The good news is that eligible first-home buyers can bundle the federal home guarantee schemes with other state government first-home buyer grants and stamp duty concessions for major savings.

Get in touch

If you’d like to give renting the big swerve and get a place of your own, give us a call.

Not only can we help you find a suitable loan and help organise your finances, we know the government schemes you may be eligible for to help get you into your first home sooner.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Phew! The Reserve Bank of Australia (RBA) has today decided to put the official cash rate on hold. So is the end of this rate hike cycle finally in sight?

The decision to keep the official cash rate at 4.10% will be welcomed by homeowners around the country after monthly repayments increased by about $1,135 per $500,000 loaned (for a 25-year loan) since 1 May 2022.

RBA Governor Philip said as interest rates had been increased by 4% since May last year, the Board decided to hold interest rates steady this month to provide some time to assess the impact of the increases.

“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy,” he said.

However, Governor Lowe kept the door open for potential rate rises in the months to come.

“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” he said.

“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the forecasts for inflation and the labour market.

How much could your repayments increase if the cash rate is increased?

Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.

If the RBA increases the cash rate by another 25 basis points, and your bank follows suit, your monthly repayments could increase by another $76 a month. That’s an extra $1,211 a month on your mortgage compared to 1 May 2022.

If you have a $750,000 loan, repayments would likely increase by about $114 a month, up $1,816 from 1 May 2022.

Meanwhile, a $1 million loan would increase by about $152 a month, up about $2,422 from 1 May 2022.

Concerned about your mortgage? Get in touch

Are you starting to feel the pinch? You’re not alone. Many households around the country are feeling the pain of all the rate rises over the past 15 months.

There are also lots of people on fixed-rate home loans wondering what options will be available to them once their fixed-rate period ends.

Some options we can help you explore include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.

So if you’re worried about how you might meet your repayments going forward, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Have you been keen to refinance but told you can’t? You’re not alone. Many Australian households are currently locked into their home loans due to rising interest rates. But some banks have recently started to lower their serviceability thresholds. 

As interest rates have climbed, Australians have refinanced in unprecedented numbers.

In fact, a record high of $21.3 billion in refinancing took place in March 2023, according to ABS statistics – 14.2% higher compared to a year ago.

But some people are now unable to refinance and take advantage of potential savings because they don’t meet lender requirements.

They’re locked into what’s called “mortgage prison”.

What’s mortgage prison?

You see, prudential regulator APRA has guidance in place that requires lenders to stress-test all new mortgage applications at 3% above the interest rate the borrower applies for – even when refinancing.

And since the RBA’s official cash rate has increased from 0.10% to 4.10% in just 13 short months, many mortgage holders are now unable to refinance because they can no longer meet the 3% mortgage serviceability buffer.

But, there is an “exceptions to policy” in APRA’s guidance that states lenders can override the 3% buffer for exceptional or complex credit applications, if done prudently and on a case-by-case basis.

So recently some big players – including Westpac and Commonwealth Bank (CBA) – reduced their refinancing serviceability buffers to as low as 1%, if borrowers meet certain circumstances (more on that below).

Other smaller lenders are making similar moves, including Westpac subsidiaries St George, Bank of Melbourne and BankSA.

Many in the industry hope this will reduce mortgage stress and defaulted loans, given the current financial climate of rising rates and inflation.

What are the eligibility requirements?

They differ from lender to lender.

But for CBA you’ll need to have a loan-to-value ratio of at least 80%, a squeaky clean record of meeting all your debt repayments over the past year, and be refinancing to a principal and interest loan of a similar or lower value.

You’ll need to meet the 1% mortgage serviceability buffer, too.

For Westpac’s new “streamlined refinance”, you must have a credit score of more than 650.

You’ll also need a good track record of paying down all existing debts over the past 12 months, be refinancing to a loan that has lower monthly repayments than your existing one, and meet the 1% buffer test too, of course.

What’s the catch?

Ok, so under CBA’s new policy, for example, borrowers must extend their loan term out to 30 years.

Obviously this can cost you quite a lot in interest over the long run.

For example, RateCity research shows that if you took out a $500,000 loan with a Big Four bank three years ago, and if you applied for CBA’s refinancing offer today, your mortgage repayments could drop by as much as $235 a month.

But over the long run, you could pay up to an extra $32,117 in interest because you’d be extending your loan by an additional three years.

So while this option could help alleviate some financial stress now, you may have to pay for it over the long run – there’s a bit to weigh up.

Are the recent serviceability changes right for you?

Give us a call today to find out more about refinancing and successfully navigating serviceability thresholds.

We can guide you on ways to improve your chances of refinancing success and help you escape “mortgage prison”.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Despite the soaring cost of living and successive interest rate hikes, homebuying intentions have climbed, latest data shows. So why are so many people still chasing the great Australian dream? And what can you do to make your own dream a reality?

Despite a flurry of rate rises, new data this month shows homeownership is once again a top priority for many Australians, with the number of house hunters increasing.

Commonwealth Bank’s Household Spending Intentions Index showed a strong 14.4% increase in homebuying intentions in May, after dropping in April.

May also saw new home sales increase across Australia for the second month in a row.

So what’s driving this appetite for property when finances are increasingly tight for many? And how can you boost your own chances of cracking the market sooner?

Rental squeeze

Across capital cities and major regional areas, there have been historic rental price increases and low vacancies.

Rental vacancies reached an all-time low of 1.1% in April, with the median price for renting a unit only $39 a week cheaper than renting a house.

Rising overseas migration has contributed to stiff competition in the rental space too – in the March quarter there was a 124% jump in rental enquiries year-on-year from one overseas country alone.

Understandably, many are looking to escape renting and grab their spot on the property market.

But with rate hikes and inflation, saving a deposit is no easy feat for many Australians.

So here are some ways to take the pressure off.

Schemes and grants to save time and money

There are many government schemes and grants designed to help you get into the market. And all can be used simultaneously, which can really bring in the savings!

Through the National Housing Finance and Investment Corporation, the federal government has three low deposit, no lenders mortgage insurance (LMI) schemes available for eligible first-home buyers, regional first-home buyers and single parents.

The First Home Guarantee and Regional First Home Guarantee support eligible buyers to purchase a home with a 5% deposit. And the Family Home Guarantee assists eligible single parents to buy with a 2% deposit.

Not paying LMI can save you anywhere between $4,000 and $35,000 – depending on the property price and your deposit amount – which can fast-track your first home-buying goal by four to five years.

Another home-buying cost that can have a real sting in its tail is stamp duty.

Fortunately for first-home buyers though, state governments have stamp duty concessions available – including South Australia, which announced last week that it was scrapping the tax for first-home buyers on new homes valued up to $650,000.

Meanwhile, Victoria, New South Wales, Queensland, Western Australia, Tasmania, the ACT, and the Northern Territory also offer stamp duty concessions. This can either eliminate or reduce the cost of stamp duty, if eligible.

Most state governments also offer first homeowner grants to help you get the keys to your own home.

Victoria, New South Wales, Queensland, Western Australia, Tasmania, Northern Territory, and South Australia all offer first homeowner grants.

If eligible, you could receive a grant of between $10,000 and $30,000 depending on your state and other eligibility criteria.

Give us a call

It’s important to note that spots for some of these schemes, such as the federal government’s first home guarantee, are limited.

And they’re popular, so it’s best to get in quick.

So if you’d like to kick renting to the curb, get in touch with us today.

We’ll help you work out your borrowing power, your loan options, and factor in what schemes you may be eligible for.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Despite the soaring cost of living and successive interest rate hikes, homebuying intentions have climbed, latest data shows. So why are so many people still chasing the great Australian dream? And what can you do to make your own dream a reality?

Despite a flurry of rate rises, new data this month shows homeownership is once again a top priority for many Australians, with the number of house hunters increasing.

Commonwealth Bank’s Household Spending Intentions Index showed a strong 14.4% increase in homebuying intentions in May, after dropping in April.

May also saw new home sales increase across Australia for the second month in a row.

So what’s driving this appetite for property when finances are increasingly tight for many? And how can you boost your own chances of cracking the market sooner?

Rental squeeze

Across capital cities and major regional areas, there have been historic rental price increases and low vacancies.

Rental vacancies reached an all-time low of 1.1% in April, with the median price for renting a unit only $39 a week cheaper than renting a house.

Rising overseas migration has contributed to stiff competition in the rental space too – in the March quarter there was a 124% jump in rental enquiries year-on-year from one overseas country alone.

Understandably, many are looking to escape renting and grab their spot on the property market.

But with rate hikes and inflation, saving a deposit is no easy feat for many Australians.

So here are some ways to take the pressure off.

Schemes and grants to save time and money

There are many government schemes and grants designed to help you get into the market. And all can be used simultaneously, which can really bring in the savings!

Through the National Housing Finance and Investment Corporation, the federal government has three low deposit, no lenders mortgage insurance (LMI) schemes available for eligible first-home buyers, regional first-home buyers and single parents.

The First Home Guarantee and Regional First Home Guarantee support eligible buyers to purchase a home with a 5% deposit. And the Family Home Guarantee assists eligible single parents to buy with a 2% deposit.

Not paying LMI can save you anywhere between $4,000 and $35,000 – depending on the property price and your deposit amount – which can fast-track your first home-buying goal by four to five years.

Another home-buying cost that can have a real sting in its tail is stamp duty.

Fortunately for first-home buyers though, state governments have stamp duty concessions available – including South Australia, which announced last week that it was scrapping the tax for first-home buyers on new homes valued up to $650,000.

Meanwhile, Victoria, New South Wales, Queensland, Western Australia, Tasmania, the ACT, and the Northern Territory also offer stamp duty concessions. This can either eliminate or reduce the cost of stamp duty, if eligible.

Most state governments also offer first homeowner grants to help you get the keys to your own home.

Victoria, New South Wales, Queensland, Western Australia, Tasmania, Northern Territory, and South Australia all offer first homeowner grants.

If eligible, you could receive a grant of between $10,000 and $30,000 depending on your state and other eligibility criteria.

Give us a call

It’s important to note that spots for some of these schemes, such as the federal government’s first home guarantee, are limited.

And they’re popular, so it’s best to get in quick.

So if you’d like to kick renting to the curb, get in touch with us today.

We’ll help you work out your borrowing power, your loan options, and factor in what schemes you may be eligible for.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Mortgage serviceability can feel like a frustrating hurdle to clear. But it’s an important safeguard against borrowing too much, particularly in the current interest rate landscape. 

It’s in the best interests of all parties involved if your mortgage is chugging along with regular repayments being made.

Borrowing an amount you don’t have a hope in hell of repaying can mean heartache for you, and can land your lender and broker in hot water.

Enter mortgage serviceability.

Before approving your loan application your lender will take a good look at your finances to see if you can meet repayments.

We’ll break down just what to expect with a mortgage serviceability test, and how you can improve your chances of gaining home loan approval.

What is mortgage serviceability?

Lenders and brokers have a duty of care to ensure you’re not provided with a loan that’s beyond your means.

In fact, the National Consumer Credit Protection Act (2009) is in place to ensure lenders and brokers are following responsible lending practices (here’s that hot water we were talking about earlier).

While this protects consumers from landing in financial dire straits, (which doesn’t have anything to do with getting money for nothin’, unfortunately) … it means that lenders and brokers are serious about checking serviceability, which can create some strict hoops for you to jump through.

So how is serviceability calculated?

Your serviceability is calculated by looking at your income and subtracting your expenses and debt repayments (including your new home loan repayment amount).

We then need to work out what portion of your monthly income can go toward repayments. This is called your debt service ratio.

It’s also important to calculate your debt-to-income ratio, which is a measurement used to compare your total debt to your gross household income.

Your credit card limit will also be taken into account and you may need to prove that you have the means to pay off the limit within three years, even if the balance is $0.

Finally, a serviceability buffer is applied to the current interest rate to see if you’ll be able to continue repayments should interest rates rise.

In 2021, the Australian Prudential Regulation Authority (APRA) raised the serviceability buffer from 2.5% to 3%.

This buffer amount has been the topic of much discussion, with some arguing it’s making it tough for people to pass the assessment and refinance to a lower-rate loan. But APRA is remaining firm at 3% given the current state of interest rates.

How to increase your serviceability

Here are our top tips for increasing your serviceability score and improving your chances of home loan approval:

– Pay down your debts to improve your debt-to-income ratio.
– Reduce your expenses by cutting out non-essentials and looking for better deals on utilities.
– Reduce your credit limits or cancel credit cards you’re not using, if appropriate.
– Increase your income by starting a side hustle, asking for a raise, landing a higher-paying job, or even a second one (which we fully acknowledge is not possible for many families).

Other ways you can increase your chances of home loan approval:

– Improve your credit score. Lenders will delve into your credit history to see if you’re good at making repayments.
– Look at spending habits. Lavish overspending on non-essentials could raise a lender’s eyebrows.
– Make savings. Showing that you can put away money on a regular basis will look good on your application.

How much can you safely borrow?

Buying a home is an exciting prospect, but you don’t want to stretch yourself beyond your means.

This is especially important given the recent RBA interest rate hikes over the past year.

But we’re here to help you crunch the numbers and find a loan that will work for you, not against you.
If you’d like to find out your borrowing power and what loan options are available, give us a bell.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Drumroll … The RBA has hiked the official cash rate for the 12th time since April 2022, increasing it to 4.10%. How much will this increase your monthly repayments? And how long does Philip Lowe plan to keep marching to this beat?

Another month, another 25 basis point cash rate rise. It’s now apparent the cash rate pause back in April was nothing but a false peak.

Reserve Bank of Australia (RBA) Governor Philip Lowe explained in a statement that while inflation in Australia had passed its peak, at 7% it was still too high and it would be some time yet before inflation was back in the 2-3% target range.

“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe,” he said.

Governor Lowe added that some further tightening of monetary policy may be required to ensure that inflation returned to target in a reasonable timeframe, but that would depend upon how the economy and inflation evolved.

“If high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment,” Governor Lowe explained.

“Recent data indicate that the upside risks to the inflation outlook have increased and the Board has responded to this.”

How much could this latest hike increase your mortgage repayments?

Unless you’re on a fixed-rate mortgage, the banks will likely follow the RBA’s lead and increase the interest rate on your variable home loan very shortly.

Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.

This month’s 25 basis point increase means your monthly repayments could increase by almost $76 a month. That’s an extra $1,135 a month on your mortgage compared to 3 May 2022.

If you have a $750,000 loan, repayments will likely increase by about $114 a month, up $1,702 from 3 May 2022.

Meanwhile, a $1 million loan will increase by about $152 a month, up about $2,270 from 3 May 2022.

Concerned about how you’ll meet your repayments?

A lot of households around the country will now be feeling the pain of these 12 rate rises. So if your household is one of them, know that you’re not alone.

Similarly, there are likely a lot of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends.

Whatever your situation, please know that there are options we can help you explore.

Some of those options might include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.

So if you’re worried about how you might meet your repayments going forward, give us a call today.

The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Australians are increasingly “thinking small” when it comes to buying a home and cracking the property market. And with perks like affordability, more desirable locations, and lower maintenance, it’s little wonder why.

Many Australians are crossing the McMansion off their wish list in favour of smaller, smarter, low-maintenance homes.

A recent ING study surveyed over 1000 Australians about their home preferences.

Over a quarter (26%) said the cost of maintaining and running a larger home would see them gravitate to a smaller abode.

And 19% said they’d consider a smaller outdoor area for ease of maintenance.

Australia has some of the biggest homes in the world, according to the 2020 CommSec Home Size Report. But it seems that there’s a swing in the other direction.

A 2022 Australian Bureau of Statistics (ABS) report shows that Australian homes are being built on smaller blocks, with a size decrease of 13% over the past 10 years in capital cities.

So why the switch to smaller homes?

What are two things we all wish we had more of?

Money and free time, am I right?

With the cost of living rising (as well as the cash rate!), cracking the property market can feel like a slog. But revising your wish list to include a smaller (and smarter) home could make it easier.

On average, smaller homes, townhouses, and units tend to be more affordable. And this can be a great option for those wanting to get into the housing market in a more attractive location.

But a smaller dwelling delivers other perks, too.

ING’s study highlighted the growing preference for lower-maintenance homes to simplify lifestyles.

According to the ABS, Aussies spend around three hours a day on domestic activities.

But a smaller space can reduce cleaning time. And with a smaller outdoor area, you can reclaim your weekend and say goodbye to all that gruelling yard work.

Also, smaller homes can be more efficient when it comes to energy consumption.

A smaller home may help make you eligible for government schemes

If you’re a first-time home buyer, the Home Guarantee Scheme could give you the extra boost you need to get into the market.

Being eligible could shave, on average, five years off your home-buying process.

The First Home Guarantee and Regional First Home Guarantee offer loans with a low deposit of 5% with no lenders mortgage insurance (LMI).

And the Family Home Guarantee offers eligible single parents loans with a deposit of just 2% and no LMI.

However, the eligibility criteria include property price caps that are dependent on the state and geographical area you buy in.

Opting for a smaller, more affordable property could help you meet the eligibility criteria and speed up your home-buying journey.

But get in quick as places are limited, with a fresh round of intakes available from July 1.

Get the ball rolling

While you search for the perfect small abode, we can get to work on the home loan hunt.

If you’re a first home buyer, we know all the ins and outs of applying for government schemes, like the Home Guarantee Scheme.

Not all lenders participate, but we know who does and can give you some options to compare.

We’re also clued in on other government schemes you may be eligible for to help stack up the savings.

So if you’d like to find out more, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Navigating the Australian property market over the past year has felt like standing on shifting sands. But is the market starting to regain stability? And if so, what can you do now to make sure you’re ready to buy?

Anyone with an eye on the property and finance market over the past few years has seen their fair share of thrills and spills. It’s been anything but uneventful.

But with the RBA’s rapid-fire rate hikes slated to peak in 2023, is there a property upswing afoot?

Westpac’s economists seem to think so – they’re predicting that the housing correction is winding down. The bank forecasts that Australian property prices will grow by 5% in 2024 after stabilising throughout 2023.

So this week we’ve looked into data from some of Australia’s leading property market and finance institutions.

The big four banks’ cash rate predictions

The RBA has raised the cash rate an eye-watering 11 times in 12 months, with the official rate reaching 3.85% in May 2023.

Understandably, this has made some would-be buyers gun-shy when it comes to pulling the trigger on applying for a home loan and buying a house.

But Australia’s four major banks have tipped that 2023/2024 could see the cash rate start to decline. Here’s what they’re each predicting:

Commonwealth Bank: peak of 3.85% reached, and will drop to 2.60% by August 2024.

Westpac: peak of 3.85% reached, and will drop to 2.10% by May 2025.

NAB: peak of 3.85% reached, and will drop again in 2024.

ANZ: peak of 4.10% by August 2023, then will drop to 3.85% by November 2024.

So, whichever financial institution you choose to listen to, it looks like we’ve either reached the cash rate peak, or are very close to it. And what goes up must (hopefully) come down.

Property prices are back on the move

In 2022 we saw national property prices take a small, but not insignificant, hit.

In response, sellers started waiting it out for a better price, creating a slim-pickings situation for house hunters.

However, Property Investment Professionals of Australia (PIPA) chair Nicola McDougall has stated that property prices look to be stabilising, partly due to the low volume of housing stock for sale.

Meanwhile, CoreLogic data shows that the three months to April marked the first quarterly boost to national property values since this time last year, with a 1% rise.

Why is this good news if you’re looking to buy? Well, hopefully you’ll soon have more suitable housing options to choose from as owners start to list again.

And with interest rates predicted to decline in 2023/2024, getting prepared now could put you in good stead to buy when the time is right.

Give us a call today

With all the above in mind, getting your pre-approved finance in place now could have you primed to pounce on your ideal home ahead of the next property market upswing.

And if you don’t think your deposit is quite there just yet, keep in mind that a new round of the federal government’s low deposit, no lenders mortgage schemes are set to become available from July 1, which can help first home buyers, regional buyers and single parents crack the market 5-years sooner, on average.

If you’d like to find out more, get in touch today and we can run you through your options and help arrange your finances.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

When buying property, it’s good to know the market value. After all, you want to know you’re paying a fair amount. But the property’s value is an important consideration for your lender too. And their valuation may be quite different.

Just how much is a property worth? Well, it depends on who’s asking.

When buying a property you’ll find there are different terms to estimate how much it’s worth, including market value, market appraisal and bank value.

And you’ll most likely find they can differ, which can be confusing.

Fortunately, we’ve got the low down to help you understand the difference. And how bank valuations affect your loan.

Market valuations vs market appraisals vs bank valuations

So, what is the difference between them all?

A market valuation, which is usually undertaken by a professional and qualified valuer, gives an estimate of the expected sale price of the property on the open real estate market.

It’s based on current market trends and is valuable to both sellers and buyers during sale price negotiations.

It can also be conducted for tax purposes for owners (ie. to calculate the taxable capital gain or capital loss).

A market appraisal (aka market estimate), on the other hand, is usually completed by a real estate agent and is often done to give homeowners an idea of how much their property could sell for in the current market.

But a bank valuation has an entirely different purpose.

When you’re buying a home or refinancing your loan, the bank will often need to conduct a bank valuation.

And it can feel like a real sting if the bank valuation comes in lower than expected.

But there’s a reason for this.

Banks are in the risk mitigation business. So their valuation is designed to provide an estimate of the property’s sale price as security against your loan should you default.

The valuations can be more conservative because lenders don’t take into consideration the property’s value in terms of an investment.

They’re looking at the property in terms of recouping loan costs with a quick sale.

And, rather than being provided by a real estate agent who may have a vested interest in price, bank valuations must be conducted by an accredited valuer.

Bank valuation process

When conducting a bank valuation, typically, the following factors are considered by the appraiser:

Current market conditions – just like with a market valuation, the current market climate and recent sales data for your area are examined.

Physical attributes – the location of the property, surrounding amenities, its layout, fixtures and features, size, structural condition, and council zoning information are considered.

Upon completion of the valuation, a report is provided to the lender to be used in assessing your loan application.

This brings us to our next point.

Pitfalls to watch out for

They say that being forewarned is forearmed. So here are some pitfalls to be aware of when it comes to bank valuations.

Say you apply for pre-approval, find a place and make an offer, but then the bank valuation is a lot less.

Or you pay a deposit on a $700,000 off-the-plan property, only to have your bank come back with a $650,000 bank valuation when it’s time to move in.

If the bank valuation is less than expected, it may lead to the bank loaning you less than you hoped for.

You may need to come up with extra funds to close the gap or pay lenders mortgage insurance (LMI), which can cost thousands of dollars.

Alternatively, your loan application could be rejected outright.

Therefore, it’s a good idea to save up a bit of a buffer to handle any valuation headaches that may crop up.

Working with an experienced broker, like us, can help you to prepare for any nasty surprises and make for a smoother home-buying journey.

Find out more

If you’re on the hunt for the perfect home, let us help you track down the right loan and lender for you.

We’ll be there every step of the way to help you navigate the loan process with ease, and help get the keys in your hand.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Business owners wanting to buy a vehicle, asset or important piece of equipment and immediately write off the full cost have just over a month to act.

That’s because the temporary full expensing scheme is set to expire on 30 June 2023.

It will be superseded by a much less generous scheme, known as the instant asset write-off, so if your business could do with expensive new equipment, an asset or commercial vehicle, you might want to act quick!

What is temporary full expensing?

Temporary full expensing is similar to the popular instant asset write-off scheme, but with an expanded scope.

Originally a stimulus measure to address the effects of the COVID-19 pandemic, the scheme allows businesses to make significant asset investments.

Businesses can have eligible depreciating assets immediately written off in full with no cost limit.

Yep, that’s right … no cost limit on eligible assets.

Applied for with your tax return, the scheme can reduce the amount of tax you have to pay for the financial year – which means you can reinvest the funds back into your business sooner.

Trucks, coffee machines, excavators, and vehicles are just some examples of assets eligible under the scheme.⁣⁣

But to take advantage of it, the asset must be installed and ready to roll by 30 June 2023.

So you’ll have to act quickly!

Asset eligibility

To be eligible for temporary full expensing, the depreciating asset you purchase for your business must be:

– new or second-hand (if it’s a second-hand asset, your aggregated turnover must be below $50 million);
– first held by you at or after 7.30pm AEDT on 6 October 2020;
– first used, or installed ready for use, by you for a taxable purpose (such as a business purpose) by 30 June 2023; and
– used principally in Australia.

What if I miss the deadline?

If you miss out on the 30 June 2023 deadline, or your order doesn’t arrive in time, hope may not be lost.

You may still be able to take advantage of the instant asset write-off.

This scheme will allow for eligible purchases of up to $20,000 to be written off by 30 June 2024, as recently unveiled in the 2023 Federal Budget.

However, as you might have noted, the available write-off amount is significantly lower than the temporary full expensing scheme that’s coming to an end.

Need a hand with a business loan?

When purchasing an asset with the intention of using this scheme, it’s crucial to select a finance option that’s suitable for your business.

And that’s where we can help out. We can present you with financing options that are well-suited to your business’s needs now, and into the future.

So if you’d like help obtaining finance that’s gentle on your cash flow, and helps you achieve your long-term goals, please get in touch ASAP so we can help you beat the EOFY deadline.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.