Up to 4,600 first home buyer guarantees back up for grabs

, , ,

Want to buy your first home with a deposit of just 5% and pay no lenders’ mortgage insurance? You could be in luck – the federal government will soon reissue up to 4,651 unused Home Guarantee Scheme spots.

First home buyers who use the Home Guarantee Scheme fast track their property purchase by 4 to 4.5 years on average, because the scheme means they don’t have to save the standard 20% deposit.

The government usually issues spots in the scheme once a year (July 1), but this time it’s reissuing guarantees that went begging earlier.

Where are these extra spots coming from?

The government states the scheme will reissue “up to” 4,651 unused guarantees for first home buyers from the 2020-21 financial year.

It adds many of the spots have been unused because of COVID disruptions, but it’s unclear exactly how many guarantees will be made available.

It’s also unclear exactly when the spots will be reissued, with the government entity overseeing the scheme – the NHFIC – saying it’s working with its panel lenders and “looks forward to reissuing unused guarantees soon”.

All in all, that means we’re going to have pretty short notice of when these spots officially become available to apply for, and they could be in short supply.

So if the guarantee is something you’re interested in, you’ll want to get in touch with us today so we’re ready to act when the spots do drop.

Back up, what’s the Home Guarantee Scheme?

Ok, so the Home Guarantee Scheme is broken up into three separate schemes: two for first home buyers, and one for single parents called the Family Home Guarantee scheme.

At this stage, it’s believed (but not confirmed) that the reissued spots will mainly be for the first home buyers through the New Home Guarantee scheme (new builds) and First Home Loan Deposit Scheme (includes existing builds).

These two schemes allow eligible first home buyers to build or purchase a home with only a 5% deposit, without forking out for lenders’ mortgage insurance (LMI).

This is because the federal government guarantees (to a participating lender) up to 15% of the value of the property purchased.

Not paying LMI can save buyers anywhere between $4,000 and $35,000, depending on the property price and deposit amount.

There are price caps on eligible properties, ranging from $950,000 for new builds in Sydney, ​​Newcastle, Lake Macquarie and Illawarra, down to $350,000 for existing properties in regional South Australia.

A full list of the price caps can be found here.

Get in touch today to get the ball rolling

With these schemes, allocations are generally granted on a “first come, first served” basis.

And it’s worth re-iterating that spots this time will be limited and will likely fill up fast.

So if you’re a first home buyer looking to crack into the property market sooner rather than later, get in touch today and we can explain the schemes to you in more detail.

And when the reissued spots become available, we can help you apply for finance through a participating lender.

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.

Think property prices will dip when rates rise? Don’t bet the house on it

, ,

Whether you’re looking to buy, sell or hold, there’s a good chance you’ve wondered whether the property market will tumble when interest rates rise, right? Today we’ll look at what happened to house prices when interest rates were hiked in the past.

Past performance does not predict future results – we’ve all heard that before.

But it’s also said that an understanding of history can help us prepare for the future.

So with all the recent talk of the Reserve Bank of Australia (RBA) increasing the cash rate in 18 months (or so), and fixed rates already going up as a result, now’s an important time to look at what has happened to property prices when interest rates rose in the past.

What does history show us?

History suggests that interest rates do not force property markets into booms or busts, rather it’s often affordability, local economic conditions, consumer sentiment, or access to lending that does, according to a Property Investment Professionals of Australia (PIPA) analysis.

The PIPA analysis looks at the six periods of increasing cash rate movements since 1994, and the corresponding national house price movements, which we’ve summarised below:

June 1994 to December 1994: Cash rate increase: 2.75%. House price increase: 1.1%.

September 1999 to September 2000: Cash rate increase: 1.50%. House price increase: 7.5%.

March 2002 to December 2003: Cash rate increase: 1.00%. House price increase: 35.7%.

March 2006 to December 2006: Cash rate increase: 0.75%. House price increase: 8.4%.

June 2007 to March 2008: Cash rate increase: 1.00%. House price increase: 8.9%.

September 2009 to December 2010: Cash rate increase: 1.75%. House price increase: 10.5%.

So what can we take from those figures?

Well, for starters, for those holding out for a cash rate rise in the hope of buying during a price dip, history is not on your side – not once did house prices fall during the above periods.

PIPA Chairman Peter Koulizos says the strength or weakness of property markets is often influenced by more than just cash rate adjustments.

“There has been much conjecture over the past 18 months that record-low interest rates are the singular reason why property prices have skyrocketed, when the cash rate was already at a former record low of 0.75% before the pandemic hit,” Mr Koulizos pointed out.

“There are clearly a number of factors at play, including some buyer hysteria I’m afraid to say, but one of the main reasons for our booming market conditions is easier access to credit, which was simply not the case two years ago when rates were also low.”

Most borrowers can also afford a rate rise: RBA and PIPA

The RBA doesn’t seem overly concerned about borrowers being able to afford their mortgages when the cash rate rises.

RBA assistant governor (economic) Luci Ellis recently told a parliamentary committee that the majority of borrowers were paying off more of their home loans than required by their contracts, particularly during COVID.

“People have been socking away money in offset accounts and redraw accounts during this period. And particularly where you had lockdowns, some people were not spending as much as they ordinarily would,” Dr Ellis explained.

“If and when rates do eventually rise, a lot of people will not actually need to raise their actual repayment, because they’re already paying more than they need to.”

It’s a sentiment shared by Mr Koulizos: “While we don’t expect rates to rise for a year or two yet – and when they do, they are unlikely to ramp up rapidly – the monthly mortgage repayments on an (average) $574,000 loan may increase by about $73 per week if the interest rate increased one percentage point.”

Get in touch if you’d like to know more

The moral of the story? You don’t have to sit around and wait for a cash rate increase to make your next move.

If you’re looking to crack the property market with your first purchase, get in touch today and we can run you through a number of government schemes that can help make it easier for you.

And if you’re already a homeowner and are concerned about what an increase in the cash rate might mean for your current mortgage (or next purchase), we’d be happy to run you through a number of options available, which could include fixing your rate, or putting extra funds into an offset account in advance.

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.

Open banking is ramping up, so how are lenders using your data?

, , , , , ,

Open banking is here and it’s charging full steam ahead. So just how are lenders and fintechs using your shared data in this brave, new, data-fuelled world? A new report has shed some interesting insights.

With all that’s gone on over the past two years, one of the nation’s biggest banking overhauls in recent memory has slipped under the radar.

It’s called ‘open banking’, and it aims to allow you to easily and securely share your banking data with your bank’s competitors to make it more convenient for you to switch banks when you think you’ve found a better deal on a financial product.

For example, instead of spending hours and hours gathering documentation (such as bank statements, expenses, earnings and identification documents) to refinance your home loan, you could simply request that your current bank sends the info across for you.

But, like most things, it comes with a trade-off: you’ve got to share your banking data with the prospective lender, fintech or allied professional to make it happen.

So just how do they use your data?

Australian open banking provider Frollo has just published the second edition of its yearly industry report, The State of Open Banking 2021, which surveyed 131 professionals representing banks and lenders, fintechs, technology providers, and brokers across the country.

The report shows open banking data availability has accelerated dramatically.

In the first 10 months of 2021, 70 banks started sharing consumer data and 14 businesses became accredited data recipients – including three of the four big banks.

This is an increase from just five data holders and five data recipients in 2020.

And more financial institutions are getting ready to jump on board.

The industry survey shows 62% of respondents plan to use open banking data within the next 12 months, and 38% within the next 6 months.

So what are they using the open banking data for?

Well, the most popular uses can be grouped into three categories:

– Lending: income and expense verification is highly valued by 59% of survey respondents.

– Money management: multi-bank aggregation and personal finance management were highly valued by 50% of respondents.

– Verification: customer onboarding (49%), identity verification (38%), account verification (34%) and balance checks (30%) were all highly valued.

For open broking, get in touch

Now, it’s important to note that open banking isn’t the only way you can make life easier on yourself when it comes to switching up financial products.

That’s what we’re here for!

We’re an open book – always happy to check whether you can apply for a better deal on your home loan somewhere else.

And as you know, we pride ourselves on taking on the vast majority of the legwork, whether we’re harnessing the power of open banking or not.

So if you’d like to explore your options, get in touch today – we’d love to help you out!

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.

Netflix and too chill: house hunters cutting corners on inspections

, , ,

More than half of Australian house hunters spend the same amount of time inspecting a property as they do watching an episode on Netflix, according to new research.

We get it. You see a house you like and you immediately want to buy it, warts and all.

But take a breath, as FOMO can be costly – with a third of recent purchasers admitting to “buyers regret”.

Not doing your due diligence on a property can also have implications when applying for finance if the lender’s valuation doesn’t come in at what you expected.

And it turns out that a lot of house hunters are leaping before they look right now.

A recent survey of 1,000 property owners by lender ME revealed that 55% of house hunters spent less than 60 minutes checking out the property they eventually purchased, despite it being one of the biggest purchases of their lifetime.

That’s about the length of a standard 55 minute Netflix episode.

The impact of COVID-19

Turns out we haven’t just become better at bingeing during COVID-19.

COVID-19 has also reduced the time buyers have to check out properties.

But it’s not always the purchaser’s fault.

About two-thirds (65%) of recent buyers said “real estate restrictions impacted their ability to inspect and purchase their property”.

And surprisingly, almost half (45%) of buyers restricted by lockdowns admitted to doorknocking vendors to ask for an inspection on the sly, as well as looking at photos and/or videos of the property.

Hidden issues

The lack of inspection time led to around 61% of Australian home buyers discovering issues with their property after moving in.

Around 40% of this group said they missed picking up the issues because they “lacked the skill or experience in inspecting the property”, while 33% simply “fell in love with the property and overlooked them”, and 18% were “impatient and concerned by rising prices”.

Overall, the top post-purchase problems included construction quality (32%), paintwork (28%), gardens and fences (23%), fittings and chattels (21%) and neighbours (17%).

Among owners who identified issues:

– 34% experienced a degree of “buyers regret” following the purchase.
– 58% would have paid less for the property had they discovered the problems earlier.
– 84% spent money fixing, replacing or improving the issues identified, or have plans to do so.

The moral of the story? Emotions are always involved when purchasing a home, which can cloud your judgement.

“Give weight to any niggling hunches that give you cause for concern and get a professional property inspector to do the looking for you,” says ME General Manager John Powell.

“It is also important to know your borrowing capacity in advance so you can buy your home with full confidence knowing you’ve got solid financial backing.”

Get in touch to find out your borrowing capacity

As mentioned above, it’s important to know your borrowing capacity before you start house hunting so you don’t stretch yourself beyond your limits.

So if you’d like to find out what you can borrow – get in touch today. We’d be more than happy to sit down with you, take a breath, and help you work it all out.

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.

Seismic shift: two major banks hike fixed interest rates

, , , , ,

Are the days of ultra-low fixed interest rates over? It’s looking increasingly so, with two major banks increasing their fixed rates this week. So if you’ve been thinking about fixing your mortgage lately, it could be time to consider doing so.

Do you know how when one tectonic plate shifts, others around it soon follow?

Well, in the past week, the Commonwealth Bank (CBA) and then Westpac hiked the interest rates on their 2-, 3-, 4- and 5-year fixed-rate home loans by 0.1% (for owner-occupiers paying principal and interest).

Meanwhile, ING also lifted its fixed rates on 2- to 5-year terms by 0.05% to 0.2%.

For mortgage-holders, it’s a clear ol’ rumbling sign that the days of super-low fixed interest rates are coming to an end.

So why are banks increasing fixed interest rates?

The Reserve Bank of Australia (RBA) has repeatedly insisted the official cash rate isn’t likely to rise until 2024 at the earliest.

But it seems the banks don’t believe them. The banks think it’ll happen sooner.

CBA, for example, is currently predicting the RBA will increase the official cash rate in May 2023, while Westpac is predicting a rate hike in March 2023 – both well before the RBA’s 2024 timeline.

Given that’s about 18 months away, the major banks are now adjusting the fixed rates on fixed terms of 2-years and longer, in order to head off the expected rise in their funding costs.

“Lenders are scrambling to lift fixed rates before they start to feel the margin squeeze,” explains Canstar finance expert Steve Mickenbecker.

“Borrowers shouldn’t be so complacent as they must expect rises inside two years, and the closer they get to that point, the less attractive the fixed rates alternative will be.

“They may want to consider fixing their interest rate for three years or longer, while the going is still good.”

Variable interest rates cut

Interestingly, a number of the banks – including CBA and ING – simultaneously slashed interest rates on some of their variable-rate home loans this week.

And CBA even cut their 1-year fixed rate by 0.1% (for owner-occupiers paying principal and interest).

So why did they do this when (longer-term) fixed rates are going up?

Well, aggressively competing for customers on variable-rate mortgages (and 1-year fixed) makes sense for lenders when a cash rate hike is predicted to be at least 18 months away.

They can always increase their variable rates when needed, but they can’t do the same for borrowers locked in on longer-term fixed-rate mortgages.

So what’s next?

As mentioned above, when the big banks make a move, it’s not uncommon for other lenders to follow suit – as seen with ING this week.

So if you’ve been on the fence about fixing your rate, it’s definitely worth getting in touch with us sooner rather than later.

We can run you through a number of different options, including fixing your interest rate for two, three, four or five years, or just fixing a part of your mortgage (but not all of it).

If you’d like to know more about this – or any other topics raised in this article – then please get in touch today.

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.