Archive for the ‘Uncategorised’ Category

The one big factor pushing house prices up

Posted on: October 5th, 2023 by Connect Financial Solutions

Property prices have soared almost 7% this year alone. With the upswing predicted to continue, we unpack what’s driving national housing values higher – and why it could pay to get into the market sooner.

Another month, another round of price upticks.

September marked the eighth consecutive month of home price growth, with CoreLogic saying property values nationally are up 6.6% since January.

That’s a solid price hike. The crazy thing is that prices are soaring despite a whole slew of interest rate hikes over the past 18 months.

So what’s pushing prices higher?

The key factor putting a rocket under property prices is a shortage of homes listed for sale.

Homeowners are sitting tight rather than selling across a number of cities, and that’s increasing competition between buyers.

According to CoreLogic, Adelaide, Brisbane and Perth have particularly low levels of homes for sale – around 40% less than previous 5-year averages.

There’s a bit more choice for buyers in Sydney and Melbourne, but both cities are still recording housing price gains (Sydney in particular).

That’s because rising prices aren’t just about a lack of homes listed for sale.

Record levels of net overseas migration are also a contributing factor.

In the year to March 2023, net overseas migration added 454,400 people to our population. That’s an extra 1,245 people each day, all looking for a home.

And according to ABS data, most immigrants settle in Sydney and Melbourne.

So as you can see, despite high interest rates, there’s upward pricing pressure on the nation’s five biggest capital cities (Hobart, Darwin and Canberra meanwhile have all seen house prices drop over the past 12 months).

Will values go higher?

At the current rate of growth, CoreLogic predicts we could see national housing values reach new highs as early as November.

Already, homes in Perth and Adelaide have smashed previous price records, notching up median values of $618,363 and $691,591 respectively in September.

Brisbane homes look set to reach record values in October, with the city’s current median home value ($761,379) just 0.6% below the previous peak.

What does this mean for home buyers?

As home prices nudge towards new highs, PropTrack says last year’s price falls have been completely reversed.

And most of the data suggests that prices are unlikely to take a tumble any time soon.

That’s because it’s possible that interest rates have peaked, population growth is rebounding strongly, and there is a shortage of new home builds.

Already we’re seeing a surge in home loan applications as more Australians recognise the current market provides a window of opportunity to buy before values rise higher.

No matter whether you’re buying a first home, second home or investment property, buying today could help you beat future price hikes.

So if you’ve got your eye on the property market, call us today and we can help you assess your borrowing power in the current climate, and even help line you up with pre-approval so you’re ready to strike when the opportunity arises.

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.

Flat chat: why units could soon become hot property

Posted on: September 28th, 2023 by Connect Financial Solutions

Apartments stand out as an affordable choice when it comes to cracking the property market, not to mention downsizing. But a looming shortage may soon push unit values higher.

For many of us, buying a house on its own block of land is the ‘great Australian dream’.

While plenty of people achieve this goal, our property journey is often book-ended by apartment living.

For first home buyers, units can be an affordable choice, costing around 30% less than houses according to CoreLogic.

Then, as we head into our senior years, an apartment offers secure, low-maintenance living, often with a wealth of amenities right on the doorstep.

Apartment demand is outstripping supply

Apartments may be affordable today, but a lack of new apartment construction, coupled with rising immigration levels, points to a looming apartment shortage according to CoreLogic.

And that could push values higher.

Over the next few years, new apartment construction is forecast to be 40% lower in the 2010s, leading to a shortfall of over 100,000 homes by 2027.

Close to 60% of the new home shortfall is expected to be in the apartment market.

On the demand side, CoreLogic says a stronger-than-expected level of migration into Australia has seen overall housing demand “skyrocket”.

Historically, new migrants head to the high-density areas of our big cities, putting extra pressure on the unit market.

As CoreLogic explains, with interest rates potentially easing in 2024, greater demand and tight supply could fuel a “price boom” in the unit market.

Why more of us are choosing apartment living

Modern apartments are packed with the latest design and sustainability features, meaning they are no longer the poor relation of freestanding houses.

Across our major cities, apartments now account for 30% of all homes, up from 23% in 2010.

And the appeal doesn’t just lie with affordability.

Today’s apartments usually come with a wealth of benefits, including:

Government schemes: because apartments are generally cheaper than houses, they’re more often under the price caps for a range of government schemes, including the Home Guarantee Scheme, stamp duty concessions, and first home owner grants (usually for new builds). These schemes can be combined to potentially save you tens of thousands of dollars and get you into the property market years sooner.

Sought-after locations: apartment living can be the difference between living close to work, or facing a long daily commute from the outer suburbs.

Lifestyle advantages: the days of apartments being cramped and lacklustre are over. A variety of on-site amenities, from barbecue areas to pools, gyms and car-wash bays, make unit living convenient and relaxing.

Low maintenance living: not interested in spending precious spare time mowing the lawns or cleaning the gutters? It turns out plenty of others aren’t either. Unlike houses, units require minimal upkeep, letting residents enjoy more quality time.

Improved security: if you’re after a lock-and-leave lifestyle, modern apartments fit the bill. Advanced security features add up to a safe and secure living environment.

Is now the time to take the leap?

Right now, apartments still present an affordable option for first-home buyers, downsizers and investors.

The median apartment price across our state capitals is currently $637,593 – but if CoreLogic is correct, that figure could soon increase as demand outstrips supply.

So if you’d like help exploring your options to purchase your first property – for example, with just a 5% deposit via the Home Guarantee Scheme – then get in touch today to discover your borrowing power.

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.

3 ways pre-approval can give buyers an edge

Posted on: September 21st, 2023 by Connect Financial Solutions

There’s a lot to be said for having your home loan pre-approved. But does pre-approval mean you’re putting the cart before the horse? Definitely not. Here are three ways pre-approval can help you get ahead of the competition.

Here’s a handy tip: you don’t have to wait until you’ve found a home you’d like to buy before making mortgage enquiries with a lender.

It’s possible to have a home loan pre-approved before you’ve even started to wear out shoe leather at open home inspections.

It can mean you’re ready to go with your loan, with only a few formalities to sort out, as soon as you’ve found the right place.

Even better, pre-approval doesn’t mean you’re committed to taking out a loan. It’s not a problem if you have a change of plans.

Here are three ways home loan pre-approval can put you in front in today’s market.

1. Pre-approval gives you a budget to stick to

When it comes to a major step like buying a home, there’s no room for guesswork.

With a pre-approved home loan, you know exactly how much you can borrow, and that’s the foundation for your home-buying budget.

It means you can focus on homes within your price range, and make an offer with confidence.

Pre-approval is especially important if you plan to bid at auction. It sets a clear line in the sand for your highest bid.

2. You can act fast

In today’s market, homes are selling in turbo-charged timeframes.

Figures from CoreLogic show the median selling time across our capital cities is just 27 days. That’s less than a month!

So you need to act fast to avoid missing out. Sellers might not wait around while you head to the bank to see if you qualify for a home loan.

Having pre-approval in place means you can get the ball rolling as soon as you find the right home, without getting pipped by a more organised buyer.

3. Pre-approval can show you’re a serious buyer

Nothing says ‘genuine buyer’ like home loan pre-approval.

Don’t be shy about letting real estate agents know your loan is pre-approved. It adds clout to your negotiations and gives vendors confidence that you have the finance to follow up any offer you make.

Just consider keeping some information up your sleeve, such as how much you’ve been pre-approved for.

After all, the real estate agent’s goal is to get the best price for the vendor, not the buyer!

How reliable is pre-approval?

Home loan pre-approval is not a guarantee that you’ll get a home loan.

You won’t get the green light for sure until you’ve found a place to buy, and the bank has checked that the property meets their lending criteria.

Your lender will also want to see that your personal finances haven’t changed since your loan was pre-approved.

It’s also worth keeping in mind that while there aren’t many downsides to obtaining a single pre-approval, getting too many over a short period of time with multiple lenders can potentially negatively impact your credit score and ability to take out a loan – as lenders might suspect you’re financially unstable.

Which pre-approval is better?

Home buyers are often surprised to learn that pre-approval isn’t available with every lender.

Even among banks that do offer this service, not all pre-approvals work the same. One sort is especially worth aiming for.

You may come across two types of pre-approvals:

1. System-generated pre-approvals

This sort of pre-approval is generated by a lender’s computer based on the information you enter about yourself.
You can get a result quickly this way. The catch is that the analysis isn’t thorough, making the outcome unreliable.

In particular, if any of the details you enter are incorrect, the bank’s IT system may wrongly say you don’t qualify for a home loan.

2. Fully assessed pre-approvals

As the name suggests, this type of pre-approval involves your bank’s credit team taking a close look at your finances, credit score and other personal and financial details to be sure you can comfortably manage a home loan.

A full assessment takes more time, but it’s worth the wait. It can help you feel more confident that you’ll be offered a home loan when you find your ideal property.

Want to find out more about pre-approval?

If you’re looking to buy a home and want to get an edge over the competition (to put in an early offer, for example), then pre-approval might be a much-needed ace up your sleeve.

We can help you work out which lender and which loan product is a good fit for your pre-approval situation.

So call us today to take the guesswork out of home loan pre-approval, and give yourself a head start over other buyers in the market.

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.

Property market climbs towards new peak

Posted on: September 14th, 2023 by Connect Financial Solutions

The property market has thumbed its nose at higher interest rates, with values rising almost 5% since March. Here’s why national housing prices are climbing higher.

Australia’s housing market is making a bigger comeback than Barbie.

Despite interest rates rising 4% in a year and a cost of living crunch, home values have skyrocketed with prices soaring 4.9% nationally since March 2023.

The strength of the rebound has wiped out about half the losses recorded in the downturn between April 2022 and February 2023, when home values fell 9.1%.

In fact, the value of Australia’s housing market just hit $10 trillion again – the first time the total estimated value hit double digits since June 2022.

So what’s driving home prices higher?

CoreLogic says three factors are pushing up property values:

– Net overseas migration: more people are arriving from overseas than are leaving. That’s a lot of extra people looking for a place to live.

– Use of savings, profit and equity: upgraders are using savings, equity or profits from their home to buy their next place instead of borrowing more. This has seen demand for property stay strong even though rates have climbed higher.

– Tight supply: the volume of homes listed for sale is a lot lower than in previous years. That spells competition between buyers, which is putting pressure on prices.

Will property prices keep rising?

Home values have been rising steadily over the past six months. What happens from here hinges on how interest rates move, and whether the economy stays in good shape.

As a guide, CoreLogic is expecting some heat to come out of the market recovery by the end of 2023.

That’s great news for home buyers – as long as cooler prices aren’t the result of more rate hikes or a sluggish economy.

How to get ready to buy your next home

In today’s environment of rapidly rising home values, home buyers can score a winning edge by having their ducks in a row before inspecting homes listed for sale.

This increasing need to be organised is one of the key reasons why 67% of Australians turn to a mortgage broker for expert support when they buy their home.

And according to research by Helia, prospective home buyers are getting support in the areas of:

– determining their borrowing power – 63% of those surveyed;
– help choosing the right loan – 60%;
– getting a home loan pre-approved – 56%; and
– applying for a loan – 55%.

So if you’d like help in any of these areas, or you want to get into the market before prices rise further, call us today to explore your home loan options.

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.

How does your home loan compare?

Posted on: September 7th, 2023 by Connect Financial Solutions

No change to the cash rate again this month, but lenders’ mortgage rates have been jumping around more than a bunch of toddlers at a Wiggles concert. We reveal the current average rates to see how your loan compares.

Home owners are celebrating the official cash rate staying on hold for several months. But behind the scenes, Mozo reports that lenders have been “astonishingly busy” adjusting their home loan rates – both up and down.

Key movements over the last month include NAB, CommBank and Bank of Queensland lifting some of their variable rates.

However, in the fixed rate market, plenty of lenders including big banks such as CommBank, ING and Macquarie have slashed their fixed rates.

It goes to show, you can’t assume your home loan still offers a competitive rate just because the official cash rate hasn’t budged.

Question is, how does your loan shape up against the market?

Average variable home loan rate

Across owner-occupied home loans, the average variable rate right now is 6.60%.

Remember though, this is an average. It can be possible to pay far less.

We are still seeing home loan rates starting with a ‘5’ rather than a ‘6’. This makes it worth checking to see what you’re currently paying.

Fixed rates prove a mixed bunch

As of early September, fixed rates are averaging:

– 6.36% – one year
– 6.57% – two years
– 6.60% – three years

If you’re bold enough to fix for five years, the average rate is currently 6.49%.

These fixed rates assume a $400,000 loan with a 20% deposit, meaning a loan-to-value ratio (LVR) of 80%.

When could we see rate cuts?

It’s the question everyone is asking: when will interest rates start to fall?

First the good news.

A number of banks, including ANZ and Westpac, are tipping the cash rate has peaked and could stay the same for some time.

Westpac thinks we could see the cash rate fall by September 2024. AMP meanwhile is forecasting rate cuts even sooner.

But … not everyone agrees.

NAB economists expect one more rate hike before the end of 2023, with rates likely to fall by next Spring.

And the Reserve Bank of Australia (RBA), which makes the official rate calls, is warning we could see more rate hikes depending on how inflation and the economy are tracking.

Make a rate cut of your own

Even the experts can’t agree on where rates are heading.

But the banks aren’t waiting around for the RBA to drive their rate decisions, and neither should you.

Call us today to see how your home loan rate compares to the broader market. Chances are there’s a better deal out there just waiting to be claimed.

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.

Low deposit first home buyers now have $82,000 in equity

Posted on: August 31st, 2023 by Connect Financial Solutions

First home buyers who bought into the market using the federal government’s 5% deposit scheme have racked up $82,000 in home equity on average, new data shows.

It’s been three years since the First Home Loan Deposit Scheme was launched, and while it’s known today as the Home Guarantee Scheme (HGS), it’s still helping first home buyers get into the market with just a 5% deposit and no lenders’ mortgage insurance (LMI).

The HGS attracted criticism from some circles – some pundits pointed to the low deposit as a stumbling block that could land homeowners in trouble if property values fell or interest rates rose.

It turns out both have happened, yet first homeowners haven’t let it hold them back.

From $35,000 deposit to $82,000 home equity

New data from the National Housing Finance and Investment Corporation (NHFIC), which runs the HGS, shows that first buyers who tapped into the 5% deposit scheme are now sitting on impressive piles of equity.

On average, these first-time homeowners have racked up $82,000 in home equity.

It’s a great result, especially when you consider that the average first home deposit across the scheme was just $35,200 in 2020, rising to $36,400 in mid-2023.

Compare that to the average deposit of $159,000 across the broader first-home buyer market, and it’s easy to see how the 5% deposit scheme gives first-home buyers a valuable leg-up into the market sooner.

What is the Home Guarantee Scheme?

Getting a deposit together can be a massive hurdle when buying a home.

Research by Finder shows it can take 12 years for a young Australian to save a deposit for an average-priced apartment, or 16 years to accumulate the deposit for a house.

But if your deposit is lower than 20%, you can get stung with LMI, which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

But through the NHFIC, the federal government has three low deposit, no LMI schemes – all under the HGS umbrella.

The first two, the First Home Guarantee and Regional First Home Buyer Guarantee, support eligible buyers to purchase a home with a low 5% deposit and no LMI.

The Family Home Guarantee, meanwhile, assists eligible single parents and guardians to buy a home with a deposit of just 2% and no LMI.

Want to crack the market sooner?

Along with the HGS, there can be other options such as family pledge loans, or the use of a guarantor, that could slash the time it takes to buy a home of your own.

So if you want to crack the property market sooner rather than later, call us today to find out if you’re eligible to buy a first home with just a 5% deposit.

You could be in a place of your own by Christmas!

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.

Help to Buy Scheme set to kick off in 2024

Posted on: August 24th, 2023 by Connect Financial Solutions

The highly anticipated Help to Buy Scheme will kick off next year, giving more Aussies a chance to score their dream home. Today we’ll unpack how the new federal government scheme will work, who it’ll benefit, and the fine print you need to know.

A key election promise of the Albanese government, Help to Buy is a shared equity scheme aimed at helping 40,000 low and middle-income earners buy a place of their own (10,000 allocations per year).

The scheme involves the government making an equity contribution worth up to 40% of the value of a new home, or 30% of the value of an established home.

But that doesn’t mean Anthony Albanese will be rocking up unannounced to claim the guest bedroom, as we’ll explain further below.

Homebuyers need a minimum 2% deposit, and must be able to qualify for a home loan with a participating lender to fund the balance of the purchase. No lenders mortgage insurance is payable.

Homebuyers can choose to boost their stake in the property at any time, and the government won’t charge rent on its share of the home.

Who is eligible for Help to Buy?

Help to Buy is not limited to first homebuyers.

You do need to be an Australian citizen, and you can’t currently own your home or have a share in a residential home.

Income limits apply too. Singles can earn up to $90,000 annually, or up to $120,000 for couples.

Help to Buy property price limits

Property price limits apply for Help to Buy across state capitals, regional centres and ‘rest of state’ areas. The price caps are shown below.

NSW capital city and regional centres: $950,000
Rest of state: $600,000

VIC capital city and regional centres: $850,000
Rest of state: $550,000

QLD capital city and regional centres: $650,000
Rest of state: $500,000

WA capital city and regional centres: $550,000
Rest of state: $400,000

SA capital city and regional centres: $550,000
Rest of state: $400,000

TAS capital city and regional centres: $550,000
Rest of state: $400,000

ACT: $600,000

NT: $550,000

Regional centres are Newcastle and Lake Macquarie, Illawarra, Central Coast, North Coast of NSW, Geelong, Gold Coast and Sunshine Coast.

How much can I save with Help to Buy?

Under Help to Buy, homebuyers can take out a much smaller home loan. This provides valuable savings in loan repayments and interest costs.

The federal government estimates homebuyers can save up to $380,000 on a new home purchased through the scheme, or as much as $285,000 on an established home.

The fine print to be aware of

For low and middle-income earners struggling to buy a home, Help to Buy may be a game-changer.

But before you rush in, bear in mind that the scheme will see you share a stake in your home with the government.

So if or when you decide to sell the property, the federal government will put its hand out for a slice of the sale proceeds.

In this way, you won’t get the full benefit of the property’s long-term price growth, but rather a share of the profits in line with the proportion of ownership you hold.

Now’s the time to start planning

With Help to Buy due to launch next year, now’s the time to start planning.

If it’s something you might be interested in, don’t delay reaching out to us to find out more – it’s bound to be popular, and places are limited, so you’ll want to start preparing now.

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.

More Aussies turn to mortgage brokers for a hand managing hikes

Posted on: August 17th, 2023 by Connect Financial Solutions

An avalanche of rate hikes over the past 18 months has supersized home loan repayments. But savvy homeowners aren’t panicking. In fact, more mortgage holders than ever before are reaching out to brokers for expert help.

A recent survey by the Mortgage & Finance Association of Australia (MFAA) shows 95% of mortgage brokers are meeting with homeowners who have never used a broker before.

And it’s a move that’s paying off.

The MFAA reports nine out of ten brokers have successfully secured a rate discount for their clients this year.

And more than eight out of ten have helped their clients refinance to a new lender.

It just goes to show that if you’re struggling with mortgage repayments, you don’t have to go it alone.

How much could you slash from your home loan?

Part of a broker’s service involves contacting your current lender to negotiate a lower rate.

But if they don’t come to the party, real savings action can lie in refinancing.

Mozo has done the sums on the savings potential of switching from the average variable rates (6.60% for owner-occupiers; 6.96% for investors) to one of the lowest rate loans on the market.

They found that homeowners and investors in capital cities across the country who switch to a new lender can slash their repayments by $474 per month, on average

That’s as much as $5,691 annually.

Now, the lowest rate loan might not be available to you in your situation (we’d have to help you check), but it does highlight that there are big savings to be made if you can refinance to a lower rate.

What if you have a fixed-rate home loan?

You’ve probably heard about the ‘mortgage cliff’ – it’s a term used to describe the financial shock that homeowners can face when their super-low fixed rate comes to an end.

And we’re not out of the woods (or away from the cliff) just yet.

The Reserve Bank of Australia says around one million borrowers will come off a fixed rate over the next 18 months.

Crazy thing is, a Finder survey shows more than one in ten people with a fixed rate home loan are in the dark about when their fixed rate will end.

That matters because skyrocketing interest rates mean the average mortgage holder farewelling a fixed rate could face a $1,677 hike in their monthly loan repayments.

So if you’re on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it’s soon, what options are available to you.

Time to call in the experts

No matter whether you’re feeling the pressure of higher rates, thinking of refinancing, or unsure about what’s happening with your fixed rate, it’s important to reach out for expert help.

Give us a call today for a helping hand with your home loan.

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.

Sneaky rate hikes – is your lender behind them?

Posted on: August 10th, 2023 by Connect Financial Solutions

The Reserve Bank (RBA) may have kept the cash rate on hold but that hasn’t stopped some lenders from hiking their variable home loan rates. Here’s how borrowers are fighting back.

Home owners may be celebrating two months of the RBA cash rate staying on hold. But don’t pop the champagne cork just yet.

Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm.

These hikes, known as ‘out-of-cycle’ rate rises, can fly under the radar.

So it’s important to keep an eye on what your lender is doing.

Who’s hiking rates?

Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate has stayed on hold.

In some cases the upticks may be as little as 0.03% – but some lenders have lifted their variable rates by as much as 0.15%.

On a $500,000 loan that could mean paying an extra $750 each year.

And right now every penny counts.

As a result, some home owners are taking matters into their own hands to help stay afloat.

One in two have changed their loan payments

Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:

– 35% are reducing extra repayments,
– 29% are stopping extra loan repayments altogether,
– 26% are tapping into redraw or offset funds to help with repayments,
– 22% are refinancing to a lower rate loan, and
– 12% are extending their loan term.

Other changes involve switching to interest-only repayments, as well as more drastic moves such as selling a home or investment property.

Be warned though, altering repayment strategies can come at a cost

While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.

Reducing or stopping extra payments, for example, means you’ll likely have your home loan longer and therefore pay more interest.

Likewise, if you tap into your redraw or offset funds, you’ll pay more interest each month.

Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.

What can you do?

Those sneaky out-of-cycle rate hikes aren’t just annoying. They can leave you out of pocket while beefing up your lender’s profits.

But you don’t just have to wear the cost.

The first step is knowing the rate you’re paying.

Check your loan statements, or ask us to investigate for you.

If you’re not happy with the rate, we can help ask your current lender for a discount.

And if they don’t come to the party, we can help you weigh up the possible costs of making a switch.

We can help you crunch the numbers to reveal which strategy will help you save today – and tomorrow.

So give us a call to find out if your lender is quietly lifting your loan rate and what you can do about it.

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.

Has the tide turned? What the RBA rate pause means for homeowners

Posted on: August 3rd, 2023 by Connect Financial Solutions

Mortgage holders rejoice – the Reserve Bank of Australia (RBA) kept the cash rate on hold in August for the second month in a row. So have we finally reached calmer waters? Or is there one last rate rise wave headed our way? 

In what many will see as better news than a Matildas’ World Cup win, the RBA held interest rates steady in August for the second month in a row.

After a relentless string of rate hikes (12 since April 2022), homeowners may be sceptical about what’s happening.

So is the RBA board finally satisfied we’ve endured enough rate hikes? Or is RBA Governor Philip Lowe saving one last rate hike for mortgage holders as a parting gift before he vacates his position next month?

Let’s take a closer look at some of the underlying data.

Inflation pressures are easing

The RBA has made it clear that it has been hiking rates to help lower inflation.

So it was welcome news this week when the Australian Bureau of Statistics announced that annual inflation has dropped to 6.0%.

It’s fair to say most of us wouldn’t normally celebrate goods and services prices rising 6% over the past year.

However, it’s a sign that inflation is still falling from its peak of 7.8%, and that’s exactly what the RBA has been aiming for.

Why the rate pause?

The RBA knows it’s treading a fine line with interest rate decisions. At its August board meeting the central bank explained why it kept interest rates in a holding pattern:

– It can take time for the economy to respond to previous rate hikes.

– The outlook for household spending is uncertain. Many households are experiencing a squeeze on their finances. Others are benefiting from rising housing prices and higher interest income.

– Consumer spending has slowed “substantially” due to cost-of-living pressures and higher interest rates.

The tide might be turning, but is one last rate rise wave coming?

Inflation is down. Rates are steady.

So far, so good.

But we may not be in calmer waters just yet.

As this diagram shows, inflation is still well above the RBA’s target range of 2-3%.

So the RBA has left the door open for further rate hikes depending on how the economy is tracking, and of course, what happens with inflation.

Indeed, the RBA said as much in its latest rate announcement: “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe”.

So … what’s the rate outlook?

As mentioned earlier, RBA Governor Philip Lowe will vacate the top job on September 17 and be replaced by his deputy, Michele Bullock.

Thus, one might think that if any more rate rises were planned in the short term, they’d take place before that transition occurs to help give Ms Bullock a clean slate to work from (assuming inflation data continues on a downward trend). And there’s only one RBA board meeting between then and now – on September 5.

Indeed, Westpac has made a bold call, saying we could be heading into a lengthy period of stable rates ahead of a rate cut, possibly in the second half of 2024.

So, with any luck, we could be through the thick of it.

Then again, all things considered, interest rates are now much higher than they were 18 months ago and will likely remain so for some time.

So if it’s been a while since you last looked at your home loan and current interest rate, call us today to make sure you’re paying a competitive rate on a loan that’s well-suited to your needs.

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.

Why are fixed rates still rising? And when might they drop again?

Posted on: July 27th, 2023 by Connect Financial Solutions

With plenty of pundits tipping interest rates will start to fall in the next 12 months, we look at why the big banks are hiking their fixed rates – and unpack what it means for the rate outlook.

The past few months have seen interest rates on fixed home loans deliver more ups and downs than a rollercoaster.

As recently as April 2023, a number of lenders were starting to cut their fixed rates.

Fast forward to July, and the major banks – NAB, Westpac, ANZ and the Commonwealth Bank – have all upped their fixed rates in the past fortnight.

Now you won’t find a fixed rate below 6% among the big four banks.

But aren’t interest rates expected to fall?

Home owners battling high rates are generally being urged to “hang in there” because interest rates are expected to slide down from their current highs over the next 18 months.

Westpac is predicting the Reserve Bank’s cash rate will drop to 3.85% by the end of next year.

Better still, NAB is anticipating the cash rate could dip to 3.10% by late 2024.

So … why are fixed rates rising then?

Some lenders are stepping up their fixed rates because they believe rates may go higher before they trend lower.

NAB and Westpac are both tipping the cash rate, currently sitting at 4.10%, could go as high as 4.60% by the end of the year.

Over at the Commonwealth Bank, the expectation is for one more rate hike, taking the cash rate to 4.35%, with a chance the cash rate may ratchet up to 4.60%.

This can all be confusing. The main point is that the prospect of rates heading higher before they head south again is a key factor driving some fixed rates higher.

What should I do?

The first step is to bear in mind that forecasts are just that – predictions. Not even the banks have foolproof crystal balls.

And the recent news that inflation slowed in the June 2023 quarter, with quarterly price rises being the lowest since September 2021, could see the Reserve Bank ease back on the interest rate dial. It could even bring fixed rates back down.

It’s also worth pointing out that not every lender is lifting their fixed rates.

A number of smaller lenders have trimmed their fixed rates, with some still offering rates below 6.0%.

That’s why it’s so important to get in touch so we can help you explore a wide range of lenders and loan products.

Your next step

Locking in your loan rate can bring certainty to your budget, and eliminate the stress of the rollercoaster rate ride.

If you’re not sure whether to go variable or fixed – or a combination of both – get in touch to see how the numbers stack up for your situation.

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.

Where homeowners are spending $1 billion a month

Posted on: July 20th, 2023 by Connect Financial Solutions

Australians are showering their homes with $1 billion worth of love each month as home improvement spending ramps up. We look at the cost of popular renovations – and how to foot the bill.

Belts may be tightening but not, it seems, for renovators.

The latest figures from the ABS show Australians spent a whopping $1,044 million on home renovations in May 2023 alone. That’s up 4.3% on the previous month.

Our passion for renovating may stem from binge-watching home improvement shows through the pandemic. But there could be another factor at play.

It can simply be a lot cheaper to renovate your home than to sell up and buy elsewhere.

If you’re thinking of a few home improvements, here’s what to consider.

What are the most popular renovations?

The 2022 Houzz & Home Report reveals which rooms Australians have targeted for home improvements.

The kitchen comes up trumps, accounting for almost one in four (23%) renovations.

Other top contenders were living room, bathroom and bedroom makeovers (each 20%).

How much will a renovation cost?

A key step in planning a renovation is crunching the numbers to know the likely cost. This is a must-do before you start collecting colour charts and carpet samples.

Smaller renovations can be affordable do-it-yourself projects. For any structural or specialist work it pays to call in the tradies – and that’s when the cost can start to escalate.

The latest Archicentre Cost Guide sets out typical costs for popular home improvements.

As a guide, you can expect to pay:

– $75-$120 per square metre to polish timber floorboards;
– up to $35 per square metre for interior painting;
– up to $4,600 for an extension; and
– up to $48,000 for a new kitchen (excluding appliances).

While home improvements may not come cheap, quality renovations can boost your lifestyle and your home’s value.

They can also be a money-saver – ‘green’ improvements such as installing rooftop solar panels can put money back in your hip pocket through lower utility bills.

How to pay for renovations

Working out how you’ll pay for a renovation is an essential part of the planning process.

You need to be sure you can comfortably afford the improvements, and avoid the not-so-exciting prospect of running out of funds mid-way through a project.

Using cash savings or a personal loan may be suitable for smaller projects – the shorter term of a personal loan (usually less than five years) can help keep a lid on the interest cost.

For more expensive projects, a home loan top-up can be a quick and easy solution, though it can hinge on you having sufficient home equity to qualify for additional funds.

At the top end of the scale, a dedicated renovation or construction loan is another option.

These can work by drip-feeding funds as different stages of the project are ticked off. You generally only pay interest on funds drawn down, making the cost more manageable.

Get started on your renovation

If a renovation is on your bucket list, call us to discover the options available to fund your project – and the costs involved.

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.

Request a callback