Broker 2 Archives

First Home Property Spike

February 1, 2020

The federal government’s first home loan deposit scheme is set to drive up prices in some segments but create value in the other property segments that do not qualify for government assistance

Already 3,000 potential first homebuyers were registered by banks in the scheme’s first month – January. At Origin Finance, our conversations with CBA and NAB show a huge demand for the scheme, with bank staff inundated with applications

And with so many places going like hotcakes in the first month alone, that leaves only 7,000 till the end of June

From February, 25 smaller lenders will also be able to arrange finance under the scheme.

Eligible borrowers will be able to buy a house, apartment or a house-and-land package with a deposit from between 5 and 15 per cent of the property’s value, compared to the usual 20 per cent, without taking out lender’s mortgage insurance

Under the scheme, a home loan of $570,000 on a $600,000 property will save the buyer about $25,700 in mortgage insurance. In this case, the buyer has a $30,000 deposit rather than the usual required $55,700.

But there is concern that the scheme will drive up the prices of properties

Maximum property purchase prices for the scheme vary between cities. For example, Sydney is capped at $700,000, Melbourne $600,000, Brisbane $475,000 and Adelaide $400,000.

In the past, the price of smaller units – typical of those demanded by first home owners get driven up by such schemes.

Meanwhile, prices of those larger units, priced just above the scheme’s maximum price are set to stagnate. Starved of a stimulus, their prices tend to go sidewards and can often represent better value for money. The First Home Owners Deposit Scheme may well save some buyers money – but not using the scheme

If you want to understand more how the first home deposit scheme works, please contact your Origin broker 0n 1300 30 67 67.

Property Growth in 2020?

December 14, 2019

Author – Graeme Salt

This time last year, one economist was predicting Australia would have the world’s biggest house price declines. Yet, 2019 has ended with price growth almost at record peaks and many wondering whether this growth will continue into 2020.

Some economists have gone so far as to argue that next year’s average growth will be 11 per cent – with Sydney and Melbourne as high as 15 per cent.

So what’s ahead?

The combination of lower interest rates, easing lending serviceability buffers and population growth is expected to bring more buyers back into the market.

And with property values rising, sellers (who have generally been on strike) will slowly return to the market increasing stock levels.

However the pace of property price recovery may be limited because, while serviceability thresholds for most borrowers has been reduced, lenders are expected to maintain their more conservative approach towards assessing borrower income and expenses.

Below is a summary of what many economists are predicting for 2020; it’s by no means a comprehensive list. However, all economists are positive about property for the next 12 months.

ANZ	6%
SQM Research	11%
HSBC	9%
Domain	4%

Supply and demand

Continued strong population growth will be another key driver supporting our property markets.

Around 300,000 people new people call Australia home every year and most of these people have jobs and are at household formation age.

At the same time, new dwelling building approvals fell by 19 per cent in 2018/19 and the forecast number of dwelling completions are likely to fall to 163,500 by 2020/21, which is well below underlying demand.

Can you get a mortgage?

The availability of finance will be the biggest stumbling block.

We at Origin Finance have noted that, in different ways, banks are starting to become more generous with their lending policies. Part of this is due to the Australian Prudential Regulation Authority (APRA) having relaxed lending standards, partly it’s because the banking Royal Commission is now in lenders’ rear-view mirror

This has meant more people are being approved for home loans, more people are coming to open for inspections and vendors who have sat on the sideline waiting for the market to turn are gaining confidence as auction clearance rates are rising (although on low numbers).

The most recent finance figures released in October 2019 show a clear lift in finance activity since mid-year with a more even spread of finance approvals to owner occupiers and investors.

But we don’t believe lenders will fully open the taps for mortgages like in the last boom and they are now very different in how they assess applications – so it’s best to chat to your Origin broker as to the most appropriate lender.

Will you experience property growth?

While economists across-the-board predict growth in 2020. They also recognise that it won’t go on in perpetuity, nor will it be across all states

As an example, Domain’s economist Trent Wiltshire forecasts that house prices are likely to stabilise in Australia’s capital cities by the end of the year and will then exhibit moderate growth in 2020. 2021 is likely to see a plateau in prices. But that these growth rates will vary by location (and units are unlikely to experience as high growth as houses)

	2020 (annual change)
Australia (combined capital cities)	2% to 4%
Sydney	3% to 5%
Melbourne	1% to 3%
Brisbane	3% to 5%
Perth	0% to 2%
Adelaide	1% to 3%
Hobart	2% to 4%
Canberra	4% to 6%

The doomsayers were wrong about property in 2019 and while the optimists could be wrong about 2020, my years of experience tell me that it will be a positive year.

If you want to chat more about a property purchase and, critically, whether a bank will lend to you, please contact your Origin broker.

Graeme Salt is a leader at Origin Finance. For a no obligations consultation on your home loan needs, please contact him on 1300 67 67.

Interest Rates to Remain Low – But Not Too Low: RBA

November 27, 2019

Author – Graeme Salt

Australia is unlikely to see “negative” or “below-zero” interest rates. At the same time, with wage growth at record lows, interest rates are likely to be at moderate levels for some considerable time.

That is the conclusion of two recent speeches from the Reserve Bank of Australia (RBA)

In a speech to the Australian Business Economists Dinner in Sydney RBA Governor Dr Philip Lowe addressed the possibility that interest rates could go below zero in Australia, but said it was more likely that interest rates would stay very low for an extended period.

Dr Lowe did not rule out further rate cuts, but said the economy was benefiting from the already low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter outlook for the resources sector.

He said the forecast remains for Australia’s economic growth to pick up, and to reach about 3 per cent in 2021.

“This pick-up in growth should see a reduction in the unemployment rate and a lift in inflation,” Dr Lowe said.

“So we are expecting things to be moving in the right direction, although only gradually.”

Some economists are forecasting another cut to the cash rate early next year, most likely in February.

Negative rates, or zero interest rates, have been a feature in European countries including Denmark, Sweden and Switzerland, and also in Japan.

On the same day, his deputy Dr Guy Debelle explained in a separate speech that that the proportion of firms expecting stable wages growth in the year ahead is around 80 per cent and only around 10 per cent anticipate stronger wages growth.

There is growing evidence to suggest that wage adjustments of 2 point something per cent have now become the norm in Australia, rather than the 3–4 per cent wage increases that were the norm prior to 2012.

Insipid wage growth in Australia has been one of the reasons why the RBA has made three rate cuts in 2019.

Yet, Dr Lowe emphasised that Australia’s growth prospects are stronger, our banking system is in good shape, our demographic profile is better and we have not had a period of deflation. In other words, while rates will remain low, the Reserve Bank remains positive for our economy .

Graeme Salt is a leader of The Futurus Group, which primarily comprises Origin Finance, Chan & Naylor Finance as well as Walker & Miller Training. For a no-obligations consultation on your loan needs please contact him on 1300 30 67 67.

5 Tips to Beat the First Home Stampede

November 23, 2019

Author – Graeme Salt

First Home Buyers are set to rush to the market thanks to a new government scheme which goes live in a few weeks.

But with the scheme only available for 10,000 homes a year, Australians are being encouraged to get their act together to avoid being pipped to the post.

The First Home Loan Deposit Scheme comes into force on 1 January 2020 and is aimed at assisting low and middle incomes get on the property ladder – often with as little a deposit as 5 per cent.

The program will be open to singles with a taxable income up to $125,000 per year and couples earning less than $200,000 per year, and will apply to owner-occupied loans on a principal and interest basis.

But it is not yet confirmed which banks will be involved in the scheme – though it is known that only 50 per cent of loans will go through the Big Four,

Even before the scheme comes into force, there has been a surge in first home buyer activity and Australians are being encouraged to get ready to make an application – or miss out

In Sydney and Melbourne, first home buyers now comprise more than 25 and 30 per cent of their respective owner occupier markets; more than double the proportion of first home buyers prior to the market peak.

And, the scheme is likely to add more fuel to the fire.

Wannabe first home-owners are being encouraged to get themselves ready to avoid missing out.

Keep expenditure to the bare essentials – those likely to miss out under the scheme are likely to be those who can’t prove they have got a grip on the household budget
Keep Christmas and holiday expenditure to the minimum – the scheme kicks off in 1 January and those who have blown it during the break will be beaten to the punch by those who can demonstrate financial discipline
Keep your job – otherwise you may have to wait till you complete your probationary period and miss the boat
Minimise your credit limit – having a $50k platinum Amex may be good for your ego. But the banks see that as an opportunity for you to get further into hock and may they may will reduce your mortgage limit accordingly
Save, save, save – sure you can borrow up to 95 per cent of the purchase price without having to pay lenders mortgage insurance. But the banks still prefer borrowers who can save.

In a few weeks, the First Home Loan Deposit Scheme is likely to add kero to the fire of a hot market for homes less than $700,000. First home buyers who don’t get their act together now are likely to miss the boat

If you want to know more about the First Home Loan Deposit Scheme and how you can get help buying your first property, please call your Origin Finance broker on 1300 30 67 67.

Property Demand Exceeds Supply – Price Rises

November 18, 2019

Sydney and Melbourne are expected to have 8m inhabitants each by 2050. Where these people will live will have a huge impact on our property markets.

Increasingly, Australians are choosing to live in apartments; in fact the number of apartment dwellers has increased by 78 per cent in the past 25 years.

But some parts of Australia are allocated for apartments more than others – and this is having an impact on property prices.

The simple laws of supply and demand mean that prices in some locations are going gangbusters; while in others, prices remain depressed.

Good examples of this are Ryde and Parramatta in Sydney where development rates of 57 per cent and 38 per cent respectively are transforming skylines. In these locations, oversupply of apartments has kept a lid on prices

But, with Australia growing at a rate of over 400,000 a year, even this oversupply will be absorbed.

And, with construction of new apartments low, the end of oversupply appears to be getting closer-and-closer – putting a floor under prices.

Reserve Bank: Borrowers Pay Less

November 9, 2019

Author: Graeme Salt

Reserve Bank analysis shows that more Australians are getting a better deal on their home loans, despite banks being under fire for not passing on interest rates in full. That is because lenders are forced to respond to increased competition.

It also shows “very few” borrowers actually pay the Standard Variable Mortgage Rate (SVR), with the average discount being 120 basis points below. On average, new borrowers receive a further discount of 30 basis points.

“That is, they tend to pay 150 basis points below the standard variable rate,” the Reserve Bank said.

Reasons for this include smaller lenders now being able to compete against the Big Four, plus mortgage brokers being able to find innovative sources of finance.

But these discounts vary, in part, according to the creditworthiness of individual borrowers or the riskiness of the loan.

The Reserve Bank also said that there had been a large shift in borrowers that now pay a rate below a so-called “package rate” in which a basis mortgage product is bundled up with other services such as an offset account and a credit card.

“Most households are paying lower mortgage rates now than borrowers were paying two years ago.”

In 2017, it was common for borrowers to have paid a rate that was close to the so-called ‘package rate’. By contrast, in 2019, a larger share of borrowers are paying rates below package rates.

On average, the banks have passed through 60 basis points of the 75-basis point reduction in the cash rate to their SVRs.

And, Australians are increasingly engaging mortgage brokers to source new lenders for them. Refinancing a loan, typically comes with much sharper rates. Many new loans are currently around 30 basis points below those of existing loans.

If you want to know more about how to get a lower rate on your loan, please contact your Origin broker on 1300 30 67 67.

Graeme Salt is a Leader of the Origin group and can be contacted on 02 9922 5055.

If you are having trouble sleeping, the RBA report can be found here. https://www.rba.gov.au/publications/smp/2019/nov/box-d-the-distribution-of-variable-housing-interest-rates.html

Big Banks Have Ripped $6bn off Aussie Borrowers. Here’s how you can get your money back

October 29, 2019

The margin between the rates banks charge loyal customers and those they charge to entice new customers has almost doubled since the Reserve Bank of Australia started cutting rates in June

New research shows that the gap in the rate offered to new customers, compared to that charged to existing customers, has blown out to 0.79 per cent, from an average of 0.47 per cent.

The higher rates being paid by existing customers is increasingly called a loyalty tax.

The big four banks control about 80 per cent of the $2 trillion residential mortgage market and a 0.79 per cent loyalty tax could mean as much as $6 billion to the big four banks.

A typical borrower with a $760,000 mortgage is being slugged with an additional $328 a month in repayments, or close to $4,000 a year. By sticking with their current lender

Lenders are competing aggressively to entice Australians away from their established lender. In addition to much lower rates, lenders are offering as much as $2,000 or enough frequent flight points for a London flight to entice you to switch.

If your existing bank is offering you no loyalty, why should you offer your bank any loyalty?

If you want to talk more about how you can avoid the loyalty tax by getting a better rate from a new lender, please contact your Origin broker now.

Why it just got easier to get a loan

September 27, 2019

This week saw major changes that will make it easier for Australians to get a mortgage.

The government told banks to be more generous in their assessment of loan applications
Westpac reduced the interest rate it uses to assess a loan; and
The RBA indicated more rate cuts were on the way

Prime Minister Scott Morrison recently warned banks to not be too “sheepish” and to do away with an “instinctiveness” towards overly tough lending standards.

This was backed up by Treasurer Josh Freydneberg’s encouragement of the banks to lend more when he said “if responsible lending laws are applied too stringently, they will also negatively impact consumer behaviour.”

The Westpac Group recently announced that it would reduce the rate it would assess loan application by 0.25 per cent to 5.5 per cent.

Over recent years, Origin brokers have had to work extra-hard to arrange loans. Since regulators announced a clampdown on lending practices, our brokers have had to arrange loans with non-conforming lenders as mainstream banks have turned away many loans.

The recent changes should see it easier for clients to get finances with banks

A recent study found 70% described the home loan process negatively, calling it ‘stressful’, ‘a waiting game,’ ‘overwhelming,’ ‘confusing,’ ‘difficult,’ ‘painstaking’ and ‘rigid.’

Further, about 29% of Australians are waiting to buy property despite promising market conditions as the home loan process has been described as hard to navigate and riddled with red tape.

Home lending jumped 5.1 per cent in July, marking its biggest monthly gain in four years, as owner-occupiers and investors roared back into action as sentiment changed and credit curbs eased.

This pick-up in lending has been followed by a surge in prices in Australia’s two biggest property markets over August. Property values increased 1.6 per cent in Sydney and 1.4 per cent in Melbourne, after much milder growth in June and July.

The Reserve Bank has indicated that it is prepared to make numerous interest rate cuts and take other measures to further stimulate the economy.

Many lenders are now offering loans around 3.25 per cent. And some have gone as low as 2.99 per cent with further reductions likely.

If you have had difficulty in getting a loan but would like to revisit your application, please contact your Origin broker on 1300 30 67 67. c

Buy Now – Pay Later?

August 23, 2019

Is now a good time to buy? The banks are lending us more, loan repayments have dropped and house prices appear to have stopped falling.

But rate cuts happen for a reason and the global economy seems to be spluttering – partly driven by fears of a trade war.

Historically, there have only been two causes of recession in Australia; unemployment and high interest rates – and both play into the 2019 home buyers’ favour.

Interest rates are at record lows and likely to get lower; already we are seeing rates that start with a 2
At 5.2 per cent unemployment is below the 6.5 per cent it reached due to the Global Financial Crisis and the Reserve Bank wants to drive it down further

However, it’s a mixed bag for the future of the economy. The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of future economic activity, has turned positive for the first time since November last year. It rose from –0.09 per cent in June to +0.05 per cent in July.

At the same time, Key Purchasing Managers Index (PMI) figures show a deterioration in Australian business conditions, impacted by a lack of confidence across the economy.

And the spate of bad news on the quality of apartment construction does not help confidence

Undoubtedly, the immediate future is uncertain. But, for property, the fundamentals remain strong. Australia’s population clock will roar to beyond 25½ million within the next six weeks, having first passed 25 million just a year ago.

This is something worth bearing in mind when we see headlines about apartment ‘oversupply’.

Australia is a long way from boom conditions, but its even further from recessionary conditions.

Rush in to the market and you could regret it if you don’t do your research

Is now a good time to buy? Probably.

Property spike or dead-cat-bounce?

July 13, 2019

So, you have got extra cash in your pocket courtesy of rate cuts and tax cuts – what do you do?

Many Australians are due to receive $1,080 cash back from the Tax Office over the next few weeks while recent interest rate cuts mean that someone on a $400,000, 30-year loan, will save $1,259 a year. But what will they do with the money?

The banking regulator has recently relaxed lending rules which some believe now boosts borrowing capacity by as much as 14 per cent. Will Australians rush back to the property market?

There is early evidence that the property market is bottoming and auction clearance rates are on the rise. But does this mean that Australians are flocking back to property?

Not necessarily – recent Reserve Bank (RBA) research argues that a “debt overhang effect” means many will use the extra cash to pay down the mortgage.

Certainly, in times of strife, we tend to save extra cash for a rainy day. But, elsewhere, the RBA has argued that Australia’s economic fundamentals remain strong and that the reason for the rate cut is designed to stimulate wage growth rather than a response to economic conditions.

Last year, Australia’s population grew by a whopping 404,800 – many of these new people will need to buy or rent a home. Undoubtedly there is currently a surplus of new homes on the market – but for how long?

A modest increase in spending, coupled with population growth, plus a boost in borrowing power means slowly, these new properties will be picked up; at some point the demand for property will outstrip supply without going gangbusters

At Origin Finance, We Put You First