Author: Comparable

Household budgets around the country are feeling the brunt of five back-to-back rate hikes. And we’ve been warned more are on the way. But just how long does it take for each rate rise to impact your monthly mortgage repayments?

As you’re probably aware, in early September the RBA raised the cash rate to 2.35%.

It was the fifth cash rate hike in a row and the fourth straight double rate increase of 50 basis points.

In response, many lenders have increased their variable interest rates.

But thankfully, lenders don’t slug you with a mortgage repayment hike straight away – there’s always a little bit of lag time to help you prepare.

Just how long? Let’s take a look.

When exactly will my variable rate rise kick in?

After the RBA hikes the official cash rate, your bank will (usually) announce its own interest rate hike from a particular date.

But this doesn’t mean your repayments will immediately increase when that day arrives.

Exactly when your rate rise kicks in depends on your lender, their policies and your home loan agreement, and your repayment schedule.

Lender notice periods for interest rate rises also differ from bank to bank – with CBA’s lasting 20 days, Westpac 30 days, NAB 32 days, and ANZ 30 days.

We’ll run you through a quick example.

Let’s say your monthly mortgage repayments are made on the 20th day of each month.

Let’s also assume the RBA increases the cash rate on October 4 next month, and you receive a notice from your lender on October 7 of a subsequent rate increase, with a 30-day notice period.

By the time October 20 arrives, you won’t be paying higher repayments, as the full 30 days notice will not have passed.

When that 30 days notice finishes on November 6, the daily interest rate you’re charged will increase to the new amount.

That means when your monthly repayment on November 20 rolls around, you’ll be charged at the new, higher rate (but calculated only from November 6).

But hey, at least you got a 44-day heads up from your lender – and it won’t be a full increase yet either.

By the time December 20 arrives, the repayment amount you’re charged will fully reflect the new rate.

Worried about how rate rises are increasing your mortgage repayments?

If you’ve received your rate rise notice and your budget forecast is looking tight, rest assured there are steps you can start taking now to help ease the pain.

First and foremost, if you haven’t refinanced for a while, there’s a decent chance you could get a better rate on your home loan.

For example, let’s say you refinance your variable rate home loan this month from 5% down to 4.5%.

⁣If the RBA raises the cash rate by 0.50% next month, and your bank follows suit, your interest rate will then be 5% – not 5.5% like it could have been if you didn’t refinance.

Another option is consolidating multiple loans – such as car or personal loans – into your mortgage to reduce your monthly expenses.

However keep in mind that, because home loans are longer, consolidating means you’ll pay more interest over the lifetime of the car and/or personal loan than you would have otherwise.

Similarly, you can consider refinancing to extend the term of your mortgage to help reduce monthly repayments.

Once again, you’ll end up paying more interest over the life of your loan (but hey, it could get you out of a pickle now).

Get in touch

Everybody’s situation is different. And we understand some of the ideas listed above might not suit your financial or personal situation – but there are others that could.

So if you’re worried about how you’ll meet your repayments in the months ahead, give us a call today and we’ll sit down with you to help work out a plan moving forward.

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.

The recent decline in rental properties has caused many to feel uncertain about their housing situation. Here’s how you can leave renting in the dust and make homeownership a reality.

Dwindling rental supplies in many parts of the country and soaring rental prices have many tenants looking for an escape.

Terms like “housing crisis” are being bandied about, and in many ways, homeownership has never looked more enticing.

The government has brought forward the regional first home buyer guarantee by three months to October 1, meaning regional Australians will soon have additional assistance to buy their first home.

But that doesn’t mean city slickers can’t get in on the action, too.

There are many government schemes designed to help you get into the market – all of which can be used simultaneously, meaning big savings for you!

Low deposit, no LMI schemes (federal government)

The federal government offers a bunch of low-deposit, no lenders mortgage insurance (LMI) schemes through the NHFIC, which can fast-track your home buying process by 4 to 4.5 years on average, because you don’t have to save the standard 20% deposit.

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

1. First home guarantee: helps up to 35,000 eligible first home buyer applicants this financial year purchase their first home with as little as a 5% deposit.

2. Regional first home buyer guarantee: supports eligible regional Australians to purchase their first home with a deposit of 5%, commencing on 1 October 2022.

3. Family home guarantee: assists eligible single parents to buy a home with a low 2% deposit.

Note that price caps apply to eligible properties and vary according to the application year and property location.

Stamp duty concessions (state government)

Stamp duty: two words that send a shiver down the spine of even the most seasoned property investor.

Fortunately for first home buyers, all state governments, except South Australia, have stamp duty concessions available for eligible applicants.

The Victorian first home buyer duty exemption, concession or reduction (for properties up to $750,000), and the New South Wales (NSW) first home buyer assistance scheme (for properties up to $800,000), help reduce or eliminate stamp duty expenses.

Queensland’s first home concession applies to eligible first home buyers purchasing a property valued under $550,000. Non-first home buyers may be eligible for the home concession.

Western Australia’s (WA) first home owner grant recipients can also apply for first home owner duty concession for eligible properties.

Tasmanian eligible first home buyers can apply for the established homes duty concession to receive a 50% discount on stamp duty for homes valued at $600,000 or less.

Northern Territory (NT) stamp duty concessions are available for eligible applicants buying house and land packages.

The Australian Capital Territory’s (ACT) home buyer income threshold scheme assists eligible parties to avoid or reduce stamp duty, depending on their income.

First home buyer grants (state government)

Most state governments (except the ACT) offer first home owner grants (FHOG) to help you achieve homeownership.

Victoria’s FHOG offers $10,000 towards the purchase of a new home valued at $750,000 and under. As does the NSW FHOG.

WA’s FHOG also offers $10,000 for new homes, with property value thresholds dependent upon location. The NT FHOG also offers $10,000, but with the added bonus of no income or property value thresholds!

Queensland’s FHOG of $15,000 is available for eligible first home buyers purchasing a new home valued below $750,000. SA’s FHOG offers the same, but for property valued at $575,000 and below.

Tasmania’s FHOG packs a wallop, offering up to $30,000 for eligible applicants.

Get in touch

Property prices might be on the decline for a little while yet, but don’t let that deter you from acting now: it’s a buyer’s market.

It’s also important to note that spots for these schemes, such as the federal government’s first home guarantee, are limited and get snapped up quickly.

So if you’d like to make the move from renter to home owner, get in touch with us today and we’ll help you work out your borrowing options, factoring 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.

The Reserve Bank of Australia (RBA) has hiked the official cash rate by another 50 basis points to 2.35%. Here’s how much you can expect to pay on your mortgage going forward and how we could give you a helping hand.

This is the fifth month in a row the RBA has increased the cash rate, and the fourth straight double rate increase of 50 basis points.

It’s also a seven-year high for the RBA cash rate.

RBA Governor Philip Lowe said in a statement that today’s increase in interest rates will help bring inflation back to target and create a more sustainable balance of demand and supply in the Australian economy.

“The (RBA) board expects to increase interest rates further over the months ahead, but it is not on a pre-set path,” said Governor Lowe.

It means a household with an $800,000 variable rate loan will pay an extra $1,000 a month than they were before the cash rate hikes at the start of May (with repayments going from $3300 up to $4300 in that time).

How much can you expect to pay on your mortgage from this month?

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 soon.

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

This month’s 50 basis point increase means your monthly repayments could increase by about $140 a month. That’s an extra $610 on your mortgage compared to May 1.

If you have a $750,000 loan, repayments will likely increase by about $215 a month, up $920 from May 1.

Meanwhile, a $1 million loan will increase $290 a month, up $1,230 from May 1.

How many more rate hikes are to come?

ANZ and Westpac are both forecasting the RBA cash rate will increase to 3.35% by November and February (respectively) next year.

So that’s another two double cash rate (50 basis points) rises.

Commonwealth Bank and NAB are a little more conservative with their predictions. They’re tipping rates will hit 2.60% or 2.85% respectively, with just one more single or double rate rise left to go come November.

So where the cash rate lands could be somewhere around those four predictions.

Worried about your mortgage? Get in touch

Everybody’s situation is different. So if you’re starting to feel the pinch and are worried about what interest rate rises might mean for your monthly budget, feel free to contact us today.

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

If you’re worried about how you’ll meet your repayments in the months ahead, give us a call today. We’d love to sit down with you and help you work out a plan moving forward.

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.

Recent back-to-back interest rate hikes have led to a cooling of the property market, and with more rate rises predicted, you may feel like pumping the brakes on purchasing. But could the current climate offer opportunities? With the predictions of coming rate rises and falling house prices, it’s not surprising many potential buyers are holding off. But if you’re ready to buy, now could be an ideal time to strike – with other buyers holding back you could have more homes to choose from, less competition and more bargaining power against the vendor. It’s a sentiment that’s starting to show in polling, with the Westpac-Melbourne Institute Index of Consumer Sentiment lifting by 3.9% between August and September – the first increase in the index since November last year. Similarly, CommBank’s Household Spending Intentions index showed a 10% increase in home buying intentions this past month. So if you’re ready to buy, or you’re on the fence, read on. We’ve outlined why it could be a good time to do so.

Less competition

Competition has been fierce and housing supply limited over the past few years, leaving slim property pickings for many. But recent rate rises and inflation have made potential buyers hesitant. We saw this in auction clearance rates at the opening of the spring buying season – typically a busy time for sales. However this year the combined capital city auction clearance rate is sitting at 62%, according to CoreLogic, down from 74% a year ago, and a peak of 80% in March 2021. And a softer market may not only mean less competition on auction day, but more choice and time to comprehensively evaluate properties without jostling with other contenders. Less competition also means the power balance has shifted to the hands of buyers, which brings us to our next point.

It’s a buyer’s market

Are you ready to rock and roll with your finances? Then you could be in a position to negotiate on price and terms. CoreLogic data shows fewer people are buying, with properties now sitting on the market for longer. In the three months to August, median days on market shot up from 20 days to 33. Vendors want sales and are anxious about moving their property. If you’re prepared to negotiate, consider targeting properties that have been on the market for a while – you may land a good price.

Prices are falling

Property prices dropped 1.6% in August, the largest national monthly decline since the 1980s. And ANZ economists are predicting a 15-20% drop next year. But once those prices bottom out, you’re likely to face stiff competition – with plenty of other would-be home owners flocking to take advantage of relatively low prices. And as we know in the property world, what goes down must come up, with prices expected to recover in 2024. So if you’re ready to buy and want to take advantage of falling prices, sooner may work better than later.

Get ahead of interest rates

It feels like another month, another rate rise. The RBA recently hiked interest rates for the fifth month in a row. And the RBA governor has indicated more rate rises to come. It may seem odd, but buying now could be of benefit. You see, lenders assess your borrowing capacity at an interest rate of 3% more than the loan you’ve applied for. That means as rates go up, the hurdle you need to clear for loan approval increases. In other words: your borrowing capacity falls. So getting ahead of rate rises now may make for a smoother loan approval process and higher borrowing power.

Come and speak to us

There’s no denying that picking the market can be tricky. But finding the right home can be trickier, and you just never know when it’s going to pop onto the market. So if you see a home you like and it’s in your buying range, get in touch today to find out your finance options and borrowing capacity. We can help take care of the finance side of things, while you concentrate on the house hunting and negotiations! 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.

For many Australians, rate hikes and inflation have made the dream of property ownership feel ever more distant. But a recent analysis shows that meeting mortgage repayments could actually be cheaper than renting for more than a third of Australian properties.

Look, we get it. Often the biggest obstacle in the way of home ownership is saving up for a deposit.

But once you’ve got that sorted – which we’ll help you tackle below – a recent CoreLogic analysis found servicing a mortgage was more affordable than average rent prices in 518 Australian suburbs. In fact, in some areas there were savings of over $900 a month.

Not to mention that with rental prices surging by about 10% across Australia over the past year and vacancy rates at a record low 1.1%, home ownership has possibly never looked more appealing!

So we’ve got some tips to help you switch from renter to homeowner in a timely (and confident) way.

Take advantage of the buyer’s market

Buying now or in the near future could mean less competition for properties, price drops and sellers willing to negotiate.

And recent rate hikes mean that, even during the spring selling season, we’re seeing fewer buyers. In fact data shows the median number of days that properties sit on the market is now 35, compared to 20 days last year.

And in response, property prices are falling. September data showed a 1.4% drop.

So by shopping around in the right areas and putting your negotiator hat on, you may get a price that could make buying cheaper than renting.

And most importantly, buying property and making mortgage repayments can create equity for you … instead of your landlord.

Get in on government schemes

There’s no denying that saving a big enough deposit to buy can be a bit of a slog.

But what if there was a way to sidestep the standard 20% deposit? And possibly avoid stamp duty too?

There are a number of government schemes you may be eligible for that can fast-track house buying by an average of 4 to 4.5 years.

The federal government offers low deposit, no LMI loans for eligible first home buyers, single parents and regional first home buyers.

Also, all state governments (except South Australia) have first home buyer stamp duty concessions for those eligible.

And you can stack these schemes together for more bang for your buck.

But you’ll have to move quickly on the no LMI schemes – they’re allocated on a first-come, first-served basis every financial year.

Give us a bell

Keen to make the leap from renter to home owner? If so, you’ll be busy researching the market and learning the art of the deal – so why not get a helping hand with your finances?

We can help find the right loan for you and provide you with helpful guidance that could increase your chances of mortgage application success.

And while we’re at it, we can assist you in applying for any money-saving government incentives 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.

Whether it’s your love life or your home loan application, no one likes getting rejected. There are many reasons why it could happen, and some can come as a big shock. So today we’ve outlined five surprising reasons to help you avoid home loan heartbreak. There are few words would-be home buyers dread more than: “your home loan application has been rejected”. It can feel like a real kick in the guts. And some of the reasons can be surprising. A rejected loan application can hold up your home-buying plans and could have a negative effect on your credit score. So it can be important to avoid this scenario. Below we’ve outlined five reasons your next application could be rejected – so you can start heading them off now.

1. Spending too much or too little

Most people know that spending too much is a major red flag for lenders. So limiting your unnecessary expenses is important. But drastically slashing costs and living a very meagre existence can also be a concern. Lenders can see this as unrealistic and unsustainable, and they can remedy it during assessment by applying the household expenditure measure (HEM) instead. HEM is a standardised benchmark used to estimate annual living expenses. And if your standard, reasonable budget is on the super savvy frugal side, there’s a chance HEM may be higher.

2. Credit cards

Having multiple credit cards and performing several balance transfers can affect your application. Every time you apply for credit an inquiry is logged on your credit history. And lenders will likely take notice. Even your “just in case” credit card can have an impact. You may need to prove you have the means to pay off the limit within three years, even if the balance is $0.

3. By now pay later services

‘Tis the season for shopping. And buy now pay later (BNPL) schemes will be rolling out the red carpet. But it might be worth resisting the temptation. The Australian Prudential Regulation Authority (APRA) amended its framework this year to include BNPL debts in the reporting of debt-to-income (DTI) ratios. Lenders will likely include BNPL debt in your DTI ratio to see your total debt in relation to your income. And a high DTI can result in limited borrowing capacity or even rejection.

4. Credit history

Your credit history is a finicky thing. Even a few late payments can cause your credit score to drop. So it’s important to make sure your bills are paid on time. Also, applying for too many credit cards or other loans can impact your credit score, and therefore your home loan application. And with increasing news of scams, data breaches, and identity theft … it’s a good idea to check your credit history health. You can request a free credit report once a year from one of three national credit reporting bodies which are listed on this government website.

5. Your type of income

Your type of income could make or break your application. Lenders typically favour traditionally employed applicants with a steady and reliable income. Many lenders consider self-employment carries a greater risk for less consistent income, and some can reject applications on these grounds. So if you’re self-employed, when applying for a home loan it’s important to target lenders who are more open to lending to small business owners (we can give you the down-low on this). Also, word on the street is that tax debt is increasingly becoming an issue for self-employed applicants. So if you have a large tax debt, it might be worth getting on top of that if you can.

Get in touch

If you’re not the kind of person who likes being rejected, well, the good news is that we’re not the rejecting type. We’d love to have a chat about your home-buying dreams to see if we can match you with the right loan and lender for you. 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.