Welcome to our July 2020 Newsletter
Good news for owner occupiers and first home buyers this month. The $25,000 HomeBuilder grant and $1 First Home Buyer LMI Offer may just help you reach your homeownership or renovation goal sooner. Home loan interest rates remain and we look into the weakness in off-the-plan andrental dominated property markets.
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 7 July.
According to the RBA, the leading indicators have generally picked up recently which suggests that the worst of the global economic contraction has now passed. However, RBA governor Philip Lowe said the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus.
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.
The RBA and the banks have said that in light of the continuing economic weakness and the spike in recent COVID-19 cases, they will be allowing repayments deferrals up to March 2020 for COVID-19 affected borrowers. However, strong commentary from bank executives indicate that borrowers will face heavy scrutiny to determine if they are eligible. This is expected to be particularly so for investors and suggests that investors on deferred repayments may have to consider selling properties to reduce debt and continue making repayments.
$1 First Home Buyers Lenders Mortgage Insurance (LMI) Offer
In positive news, St George has announced their $1 First Home Buyer Lenders Mortgage Insurance (LMI) Offer. Under this offer, the cost of LMI for first home buyers with only a 15% deposit will be reduced to $1. (Typically a 20% deposit is required to avoid the need for LMI). By reducing the cost of LMI, this could help first home buyers own their home sooner.
Read here for more information.
Home value movements
Home values remained low in June as market activity continues to show improvement from April. The Home Value Index report from CoreLogic shows the estimate of home sales activity in June was up by 29.5%. Tim Lawless, CoreLogic’s head of research, said “The downwards pressure on home values has remained mild to-date, with capital city dwelling values falling a cumulative 1.3% over the past two months. A variety of factors have helped to protect home values from more significant declines, including persistently low advertised stock levels and significant government stimulus. Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values.”
The five largest capital cities have recorded a decline in home values over the month. Melbourne has posted the largest fall over the month, down at -1.1% in June. Home values were also down in Perth (-1.08%), Sydney (-0.83%), Brisbane (-0.43), and Adelaide (-0.19%), but slightly rose in Hobart (+0.34%), Darwin (+0.28%) and Canberra (+0.14%).
Many investors have witnessed rental reductions on their properties as the weakness in the economy has resulted in lower rental demand. Below is a table showing the weakness in rents over the past 12 months.
Weakness is expected to continue particularly in inner city suburbs dominated by rental properties. This is suggested by the surge in property listings in these areas resulting from falling rental demand.
Off-the-plan apartment markets are also continuing to show a large proportion of settlement valuations being lower than their contracted purchase price. This indicates a continuing high level of settlement risk in off-the-plan purchases where buyers are typically reliant on sufficient On-Completion valuations to obtain unconditional loan approval.
For further information, read the National Housing Market Update from Corelogic.
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: www.corelogic.com.au/research/monthly-indices www.realestate.com.au/auction-results/ www.rba.gov.au/media-releases/2020/mr-20-13 https://www.rba.gov.au/media-releases/2020/mr-20-17.html https://www.corelogic.com.au/news/housing-values-decline-second-consecutive-month-june-turnover-recovers-april-low
*Interest Rates are correct as at 14 July 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.