• LoanCaddie

July 2019 Newsletter

Great news for homeowners and property buyers this month. Home loan interest rates have fallen again. If you’re in the market for a home or want to invest in property, now is a good time get pre-approval on a competitive home loan.

Serviceability criteria

Following industry consultation, APRA has allowed banks to set their own assessment rates used to assess long term serviceability and borrowing power. Previously APRA required banks to assess based on a long term interest rate of 7% or above, despite the current ultra low interest rate environment.

ANZ has consequently been the first to change their assessment rates. The current ANZ Floor Rate of 7.25% will be amended to 5.50% and the Sensitivity Margin that is currently 2.25% will be changed to 2.50%.

It is estimated that impact of this will be:

  • up to 14% increase in borrowing power for owner occupiers

  • up to 9% increase in borrowing power for investors on principal & interest repayment loans

  • up to 5% increase in borrowing power for investors on interest only repayment loans

Westpac has made a similar change reducing the Floor rate to 5.75%.

We expect other lenders to follow.

Interest rate news

At its July meeting, the Reserve Bank of Australia (RBA) decided to cut the official cash rate for the second month in a row, bringing it to just 1% p.a. – a new historical low. Many analysts agree there will likely be at least one more RBA rate cut this year, which would bring the official cash rate to just 0.75% p.a. and some are predicting it may even fall as low as 0.5% p.a.

Most lenders passed on the RBA rate cut to home owners last month, bringing interest rates on many standard variable rate home loans to as low as 3.% p.a. See our interest rate finder to view our best rates.

Home value movements

During June, Melbourne and Sydney both recorded slight home value increases for the first time since 2017 and Hobart also showed an increase. However, national property values dipped by 0.2% on average across the month, and there were sharp falls in Brisbane, Adelaide, Perth and Canberra, which could be an indicator that the property market correction is not quite over yet.

It seems likely that the re-entry of property investors to the market was responsible for the rise in home values in our biggest markets, last month. Tim Lawless, a market analyst from CoreLogic, said that “the removal of uncertainty surrounding changes to negative gearing and capital gains tax discounts [following the Federal Election] has boosted confidence.”

Property market activity

If you’re in the market for a bargain, see us about a pre-approval!

Even though winter has arrived, there are still many homes up for sale and it may be a great opportunity to negotiate on price. It pays to enter negotiations armed with a pre-approval on your home loan. If you’re in the market give us a call, we’d be happy to help.

Other useful information