Spring is on its way and that means that there are only weeks to go until we traditionally see the property market heat up. Amid unprecedented economic events, the immediate term view remains unsure. Despite these uncertainties, if you are in a good financial position, right now could be a good time to get onto the property ladder. For those looking to refinance, competition between lenders has resulted in lower variable rates being offered despite no recent interest rates changes by the RBA.
Finance news
The Reserve Bank of Australia (RBA) announced it has decided to keep the official cash rate unchanged at 0.25 per cent at its meeting on the 4 August.
RBA governor Philip Lowe said that while Australia is experiencing its biggest economic contraction since the 1930s, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. The recovery, however, is likely to be both ‘uneven’ and ‘bumpy’ as the country’s second biggest state locks down to fight a resurgence of the coronavirus.
Australian banks have allowed about 10% of all mortgages to be deferred in response to the pandemic. Bank executives have predicted more customers with deferred loans would resume making payments in weeks ahead, notwithstanding a further rise in deferrals in Victoria. However, they have also commented that interest was still being capitalised onto the deferred loans, and there was a risk that some customers could dig themselves deeper into trouble by pausing their payments for too long. For borrowers who are unable to meet their mortgage payments, they will need to consider selling their properties in the coming months, warning it would not make sense to continue accruing interest. A different story applies, if you are in a good financial position, right now could be a good time to get onto the property ladder. - We recommend investors understand the relationship between property market cycles and potential changes in their own employment situation which may impact your ability to meet mortgage repayments.
Our most competitive interest rates are as follows.
Owner occupiers - principal & interest repayments:
2.18% (2 years fixed) - comparison rate 2.81%*
2.68% (variable) - comparison rate 2.94%*
Investors - interest only repayments:
2.34% (3 years fixed) - comparison rate 3.88%*
3.14% (variable) - comparison rate 3.54%*
For more interest rates, view our rates or contact us.
Home value movements
Home values continued to decline on its third month, falling by 0.6% in July as the sales activity consistently improved since May. The Home Value Index report from CoreLogic shows the estimates for national sales over the past three months were tracking 2.9% higher than the same period last year. Tim Lawless, CoreLogic’s head of research, said “The impact from COVID-19 on housing values has been orderly to-date, with CoreLogic’s national index falling only 1.6% since the recent high in April and housing turnover has recovered quickly after it’s sharp fall in late March and April.”
Recovery in auction market was seen through June and early July but weakened since Melbourne moved back into lockdown. Melbourne’s housing market has posted the largest fall over the month, down at -1.19% in July. Home values were also down in Sydney (-0.87%), Brisbane (-0.35%), Perth (-0.60%), Darwin (-0.33%) and Hobart (-0.20%) but rose in Canberra (+0.59%) and Adelaide (+0.05%).
The table below shows how much median values in each capital city changed in July.
* Monthly Home Values figures as at July 31, 2020 * Australian auction results, clearance rates and recent sales for the week ending August 2, 2020. The clearance rate is preliminary and current as at 10:14 am, August 3, 2020.
We’re here to help you achieve your property goals
The interest rates will remain low for a while, so now could be the time to secure the property you want at a competitive price. To secure a home loan pre-approval so you’re in a strong position to negotiate, please get in touch with your broker.
Additional Sources: https://www.rba.gov.au/media-releases/2020/mr-20-18.html Housing values decline for a second consecutive month in june, as turnover recovers from the april low.
Disclaimer:
*Interest Rates are correct as at 24 August 2020 and are subject to change at any time. Comparison rate calculated on a $150,000 secured loan over a 25-year term. WARNING: Comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.