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Every way to save money on your home loan, ranked from best to last resort

October 4, 2023

Tawar Razaghi| Domain\ 6 September 2023
Every way to save money on your home loan, ranked from best to last resort (domain.com.au)

Home owners who locked in cheap mortgage rates two years ago and are now rolling off can save cash by renegotiating, but experts warn against options that will cost more in the long term.

While the Reserve Bank of Australia decided to hold the cash rate steady at 4.1 per cent at its meeting on Tuesday after a string of hikes, households who took out a fixed-term mortgage in recent years are facing paying triple the interest rate when their term ends.

Thousands of households are coming off pandemic-era rock bottom interest rates. Photo: Joe Armao

Experts say home owners should start by haggling with their bank for a better rate rather than settle on the revert rate they automatically roll onto when their term expires.

They should also shop around for a better deal. These are their two best options to cut their new monthly repayments, and will save money over the life of the loan, unlike more extreme options such as switching to interest-only or extending the loan term.

A homeowner who took out a $1 million principal and interest loan in September 2021 would roll off onto an estimated variable rate of 6.5 per cent and monthly repayments of $6244, RateCity modelling shows.

If they opt to haggle with their bank to get a 0.5 percentage point reduction, as their first port of call, their monthly repayments would drop by $308.

If the same household shops around to refinance to one of the lowest rates in the market at an estimated 5.75 per cent, their monthly repayments would drop by $459.

RateCity’s director of research Sally Tindall said despite past interest rate rises, banks were willing to offer a better deal to customers.

“The banks are very much in the mood to negotiate. They’re sick of losing customers, and they’ve had enough of the refinancing storm, particularly if you’re a flight risk,” Tindall said. “If you can even get a 25 basis point off, something is better than nothing.”

Options for a borrower who took out a $500,000 loan two years ago

But mortgage holders should not stop there, Tindall warned, and should continue to refinance if there is a better deal available.

“A bank can hand out a rate cut in the space of a day. Get the rate cut when you can, a refinancing application can take up to six weeks,” she said. “Go through the process of finding out if refinancing will save you more money. Banks reserve their sharpest rates for new customers. It’s worth checking.”

Beyond that, mortgage holders still feeling the pinch can switch to interest-only repayments in the short term. It would add an estimated 0.5 percentage points to their rate, but reduce monthly repayments by $615 on the same $1 million loan.

However, it would add an extra $39,150 in interest over the life of the loan if no additional repayments were made.

Canstar group executive of financial services Steve Mickenbecker said mortgage holders should only opt for interest-only repayments as a short-term solution to relieve cash flow problems.

“You’ll be paying a loading of about 0.5 per cent but it does save the cash flow stress and pressure. It’s not a huge saving but it does mean there’s less coming out of the household budget,” Mickenbecker said.

The last resort for struggling mortgage holders would be to extend the life of their loan, experts said.

Under that scenario, mortgage holders who were two years into a $1 million loan and extended back out to 30 years, would see their monthly repayments drop by $144.

But it would add an extra $97,921 in cost over the life of the loan if no additional repayments were made.

“It can significantly reduce the amount of repayment,” Mickenbecker said. “It can make sense but again you’ve got to get back on track in the long term.”

Mortgage broker Chris Foster-Ramsay of Foster-Ramsay Finance said beyond these options, more serious cases of mortgage hardship were treated on a case-by-case basis.

“After that emergency bucket come the hardship provisions. Banks are not in the business of selling houses. They want to help but at the same time want you to honour your repayments,” Foster-Ramsay said.

Westpac senior economist Matthew Hassan encouraged mortgage holders rolling off fixed rates to contact their banks and start discussions early.

“If people have managed to accumulate prepayments or savings, using that to reduce the principal and refinance would make sense. They would be the big ones,” Hassan said.

“We’re about halfway through this roll off of fixed to floating. My concern from here is the borrowers who are rolling off fixed-rates are facing bigger step up .”

Red-hot housing market to cool in 2022: analysts

January 20, 2022

Larry Schlesinger| Australian Financial Review| 7 January 2022

https://www.afr.com/property/residential/red-hot-housing-market-to-cool-economists-analysts-2022-predictions-20220104-p59lu4

Rising mortgage rates, further macro prudential intervention, affordability constraints, a pick-up in new housing supply and an increase in property listings are expected to significantly cool the red-hot housing market in 2022, before a moderate downturn in 2023, economists and housing market analysts have predicted.

While none of them foresaw the extraordinary 22 per cent boom in national dwelling values recorded by CoreLogic over 2021 – most analysts were overly cautious, predicting single digit gains – economists such as AMP Capital’s Shane Oliver said the risks to forecasts this time round were more on the downside than the upside.

Sydney house prices gained nearly $1000 a day in 2021, but that is likely to settle this year, before declining in 2023, say economists.

“Interest rates are still low, but fixed mortgage rates, which account for 50 per cent of new loans, are starting to rise,” he told AFR Weekend.

“Those are a lot more important and when they start to increase they have a dampening impact on demand. If the RBA hikes rates in November and December 2022, then prices could start to decline even earlier than expected.

He added: “For so long the housing market has relied on low rates. Each boom has been underpinned by easing monetary policy, which seems to be coming to an end.

Mr Oliver expects house prices to rise 5 per cent in 2022, before falling by up to 10 per cent in 2023.

“The fall in house prices in Melbourne in December could be a sign of things to come.”

As to the impact of the omicron variant on the housing market, Mr Oliver said that remained unclear, though it was likely to reduce buyer confidence, dampen listings and reduce transaction activity.

From a symbolic point of view, you need the cities back, says Shane Oliver. — Going down: Shane Oliver expects property prices to fall in 2023. Dominic Lorrimer

“The main risks to our forecasts are on the downside and could come from another big coronavirus setback to the economy or, alternatively, faster mortgage rate hikes, which is the biggest risk.

“The main risk on the upside would be a rapid surge in immigration post the federal election to make up for lost immigrants over the last two years, although this is likely to show up initially in higher rents and then higher prices with a lag.”

While Mr Oliver was well off the mark when he predicted just a 5 per cent rise in house prices in 2021, so too were many others.

ANZ’s head of Australian economics, David Plank, expected house prices to rise by close to 10 per cent in 2021. Tim Lawless, CoreLogic’s national research director, tipped gains of 7-10 per cent in 2021 and UBS Economics tipped 5-10 per cent growth.

Asked why, like so many others, he got his forecast wrong in 2021, Mr Oliver said a key factor was underestimating the role record low interest rates would play in fuelling demand.

“Also, we did not expect that the rotation in spending from services into goods would go on for so long, and that people would spend more on their homes and go and buy holiday homes,” Oliver said.

Veteran housing market analyst Louis Christopher, founder of SQM Research, was more bullish than some last year. He forecast average capital city house prices to rise between 5 and 9 per cent in 2021, led by Perth (8 to 12 per cent), Sydney (7-11 per cent) and Adelaide (6-10 per cent).

”Overall, we are giving ourselves a six out of 10 for the year,” Mr Christopher told AFR Weekend.

Asked why so many forecasters had missed the oncoming boom, Mr Christopher put it down, partly, to “so much uncertainty” at the start of 2021.

“We had the northern beaches lockdown, there was no vaccine released as yet, and the federal government was insistent that financial support would be reduced.

“So it’s hard to be extremely bullish in such an uncertain environment,” Mr Christopher said.

Louis Christopher: APRA will intervene to take the heat of housing in 2022.

Border closures also made Mr Christopher cautious, given they mean very slow population growth and in theory less demand for housing amid forecasts that 170,000 new homes would be completed in 2021.

What was unexpected though was the extent to which people chose to spend their surplus disposable income on property.

“You couldn’t go on holiday, but you could buy a property.

“And perhaps we have all underestimated that property can be a ‘go to’ asset of choice in times of uncertainty,” Christopher said.

This year, Mr Christopher anticipates gains of up to 5 per cent under SQM’s base case modelling, and believes APRA will intervene in the market this year, as it did in October when it increased the interest rate buffer, to ensure an orderly slowdown.

“If the market takes off again in 2022 – a real possibility – then APRA will take additional action until they get the slowdown they want.

“One thing we know is APRA has been very clear that it wishes to reduce ‘risks’ in the market,” he said.

“As such, it is possible that a third move or even a fourth move could also happen, especially if the RBA does not lift rates,” Mr Christopher wrote in SQM’s Boom and Bust Report 2022.

The cities most affected would include Sydney and Melbourne, he said, “as these are the cities where prices to incomes are most stretched”.

“We expect a correction in regional townships regardless of any APRA action,” Christopher added.

ANZ economists Felicity Emmett & Adelaide Timbrell expect modest gains in 2022 and then a fall of about 6 per cent in 2023.

“The 20 per cent-plus gains in house prices over the past year won’t be repeated in 2022,” they said.

“Affordability constraints are biting, new listings have lifted strongly, and macro prudential tightening and higher mortgage rates are set to constrain lending over the coming year,” the pair said.

HSBC chief economist Paul Bloxham, who had one of the most bearish forecasts at the start of 2021 (tipping growth of zero to 4 per cent) is one of the more bullish this time round.

He expects house prices to rise between 5-9 per cent in 2022 and then stay in positive territory in 2023, rising between 1-4 per cent.

“Our forecast has the RBA on hold at 0.1 per cent over 2022, offering some continued support to the housing market. At the same time, some fixed rate mortgage rates are likely to start increasing regardless.

“Overall, the combination of continued housing supply and limited population growth should see less upwards pressure on housing prices,” Mr Bloxham said.

The Commonwealth Bank’s head of Australian economics, Gareth Aird, expects house prices to rise a further 7 per cent in 2022, followed by an orderly correction in dwelling prices of 10 per cent in 2023.

“A gradual and shallow RBA tightening cycle, that takes the cash rate to 1.25 per cent by the third quarter of 2023, lies at the heart of our expectation that home prices will contract over 2023,” Aird said.

The Sydney suburbs where prices will climb 4pc a month

January 20, 2022

Nila Sweeney| Australian Financial Review| 11 January 2022

https://www.afr.com/property/residential/the-sydney-suburbs-where-prices-will-grow-4pc-a-month-20220110-p59n55

Housing prices are on track to rise 4 per cent a month over the next six months in chronically undersupplied areas of Sydney, defying the surge in listings that has taken some heat out of the market in the NSW capital.

Demand most strongly outpaces supply in Pittwater, Warringah and Sutherland, while prices will also keep rising in Newcastle, Gosford, Port Stephens and the Snowy Mountains, where listings remained low relative to demand, data provider and consultancy Suburbtrends says.

In ACT Weston Creek, Tuggeranong and Woden Valley also face escalating prices.

Despite the recent surge in listings, house prices in Warringah and Pittwater districts are still poised to grow by up to 4 per cent each month over the next three months, amid strong demand.

“Most of these markets appear to have surged past their peak rate of growth during the last quarter, but the underlying strong demand and limited supply would likely keep them growing, albeit at a slightly reduced rate in 2022,” Suburbtrends director Kent Lardner said.

“Growth rates for these areas are expected to range between 1 per cent per month to a high of 4 per cent per month for the next quarter or two.”

ANZ has predicted Sydney dwelling prices to rise by 6 per cent this year, a sharp slowdown from last year’s 23.5 per cent growth. But the figures are a clear reminder that even as this happens some areas will continue to draw many buyers and trigger competitions for homes.

House prices in the Warringah area, which covers Frenchs Forest, Freshwater, Belrose, Narrabeen and Collaroy, are expected to climb between 3 per cent and 4 per cent each month over the next three months.

Similar growth is forecast in Woden Valley, which encompasses Curtin, Garran, Hughes, Chiefly and Lyons.

Newcastle, Pittwater, Gosford

Newcastle is poised to see up to 2 per cent growth each month over the next quarter or two, while Gosford house prices are on track to post up to 3 per cent monthly gain.

“The recent surge in listings was not enough to satisfy demand in these areas,” said Rich Harvey, chief executive and founder of Propertybuyer, a Sydney-based buyer’s agency.

“House listings have been tight for so long in areas such as Freshwater, Avalon and Newport on the northern beaches, where stock had fallen by around 40 per cent.

“With such a strong demand, I’m not surprised if we see another 5 per cent to 7 per cent price growth in these areas this year.”

Tight markets

Over the last 12 months, house prices across these undersupplied areas jumped an average 27 per cent as the inventory fell below one month’s worth of supply, Mr Lardner said.

“These are housing markets where inventory levels have been very low over the last six months, when effectively not a single month in any of them has over four months of inventory – a level when price growth starts to diminish due to oversupply,” he said.

“The current maximum inventory level is just two months, which means that if nothing else got listed for sale today, in under two months there would be no houses available to buy in any of these areas.

“Even allowing for a marginal increase in listings and a reduction in sales, these markets will remain very tight for the next six months, which will put upward pressure on prices.”

The Weston Creek district in Canberra has the lowest inventory at 0.48 of a month, or just 14 days’ worth of stock, while the Sutherland-Menai-Heathcote area has 0.79 month, or 24 days of supply.

In Newcastle, stock level is sitting at 1.41 months, Pittwater has 1.28 months’ worth of stock, while Gosford has 1.57 months’ of supply.

Supply of new housing was also likely to remain low across these areas, with the average number of building approvals sitting at less than 1 per cent of the housing stock, Mr Lardner said.

“The main problem exists along the coastal areas where we simply don’t have enough available land to expand supply, which is evident in the limited counts of building approvals,” he said.

“This will force buyers into adjacent areas, causing a coastal ripple effect between many regions and suburbs.”

More than 300 suburbs hit $1m+ median price

January 19, 2022

Nila Sweeney| Australian Financial Review| 13 January 2022

https://www.afr.com/property/residential/more-than-300-suburbs-hit-1m-median-price-20220111-p59ndy

More than 300 Australian suburbs have crossed the $1 million, median house value in just seven months, with Sydney and regional NSW adding the largest number of new entrants, data from CoreLogic shows.

Between May and December last year, 311 suburbs hit a median price of $1 million or higher, lifting the nationwide total 38.4 per cent to 1120.

Tascott in the Gosford district has joined the ranks of suburbs with a million dollar plus median house prices.

A total of 77 Sydney suburbs joined the ranks, with most of the new entrants located on the Central Coast, as demand rippled out from the capital. There are now 417 Sydney suburbs with million-dollar-plus median prices.

Houses in Tascott, Woy Woy, Umina Beach and Lisarow in the Gosford area now have a million-dollar median, as well as those in Tumbi Umbi, Bateau Bay, Chittaway Point and Ourimbah in the Wyong district.

The number of million-dollar suburbs more than doubled to 116 in regional NSW, boosted by many Newcastle suburbs joining the club.Advertisement

Among them are New Lambton Heights, Lambton, New Lambton, Adamstown, Adamstown Heights and Carrington.

Brisbane also recorded a sharp rise in the number of suburbs hitting the million-dollar mark with 40 new entrants, taking its total to 91, while regional Queensland added 36 suburbs to 82.

It’s almost impossible to buy a house under a million dollars within a 10 kilometre radius from the CBD.
— Brisbane buyers’ agent Zoran Solano

They include suburbs from Brisbane’s north, south and west such as Sandgate, Shorncliffe, Nundah, Kedron, Sunnybank, Annerley and Enoggera.

“I’m not surprised to see a large increase in the number of suburbs reaching the million-dollar mark in Brisbane because of the strong growth we’ve had in the past year,” said Zoran Solano, buyer’s agent with Hot Property Buyers Agency based in Brisbane.

“A lot of these suburbs have been flying under the radar for so long, but are now rising strongly as buyers seek out cheaper options. At the moment, it’s almost impossible to buy a house under a million dollars within a 10-kilometre radius from the CBD.”

In Melbourne, 37 suburbs have joined the pool and lifted the total to 221, while Adelaide added 25 suburbs to 70 and the ACT recorded 18 new additions to a total of 45.

Melbourne’s north-east, north-west and outer east accounted for the majority of suburbs reaching million plus medians. Among them are Watsonia, Heidelberg Heights, Keilor East, Gisborne, Croydon and Selby.

In Adelaide, most of the newly minted million-dollar suburbs are located in the central and hills district, such as Teringie, Stirling, Nailsworth, Aldgate and Prospect.

Canberra’s new additions are mostly from the Gungahlin and Belconnen districts, such as Palmerston, Moncrieff, Throsby and McKellar.

In Perth, 10 new suburbs have crossed the million-plus median, and boosted the total to 52. They include inner Perth suburbs as well as those in the north-west and south-west such as Inglewood, Fremantle, Alfred Cove and Waterford.

Hobart’s million-dollar suburbs count has risen from two suburbs to seven. They include Newtown, Mount Stuart and South Hobart.

Considering housing values nationally have increased by 22.6 per cent since March 2020, it’s no surprise.
— CoreLogic’s Tim Lawless

Since the onset of the pandemic, the share of million-dollar suburbs has ballooned across the country, rising from just 16.2 per cent of all suburbs nationally in March 2020 to 29.8 per cent of suburbs in December 2021, the CoreLogic data shows.

“Considering housing values nationally have increased by 22.6 per cent since March 2020, it’s no surprise to see the number of suburbs with a median value of at least a million dollars increase so substantially,” said CoreLogic research director Tim Lawless.

“In cities like Sydney, where the median house value first rose above the $1 million dollar mark in 2016 and is now approaching the $1.4 million mark, a million-dollar purchase price for a house has become the norm.

“However in some regions, the rise in the number of suburbs where the typical house is worth more than a million dollars was quite a new phenomenon.”

In Hobart there was not a single suburb with a million-dollar, median house value before the pandemic, but now there are seven across the metropolitan area of Hobart, representing almost 15 per cent of all suburbs.

More than seven in 10 Sydney suburbs are now attracting more than a million-dollar median house price, compared to just one in two, before the pandemic.

But the jump in the share of suburbs with a million-plus median has been the most spectacular in the ACT, Mr Lawless said.

“Leading into the pandemic only 4.9 per cent of suburbs were recording a median house value of $1 million or more, with that figure rising to almost 54 per cent by the end of last year,” he said.

“The surge in suburbs with a million-plus, median value is a reminder of the worsening housing affordability pressures and the record level of housing debt in Australia.”

The proportion of suburbs with a median house value of $3 million or more rose to 2.3 per cent last December from 0.6 per cent in March 2020, with 94 per cent of these suburbs located in Sydney and 6 per cent located in Melbourne.

Despite a surge in house value during the pandemic, suburbs with a median value of $5 million or higher remained scarce, with only eight suburbs, which are in Sydney or 0.2 per cent of all suburbs nationally.

Why banks are hiking fixed mortgage rates

January 19, 2022

Rod Myer| The New Daily| 23 December 2022

https://thenewdaily.com.au/finance/property/2021/12/23/fixed-term-home-loan-rates-rise/

Australia’s major banks are hiking their fixed-term mortgage rates in response to concerns about surging inflation in the US.

Anyone wanting a three-year fixed home loan from one of the Big Four banks will have to pay at least 2.89 per cent now.

And anyone who wants to fix their loan for four years will have to pay a minimum of 3.19 per cent.

National Australia Bank is leading the way with the interest hikes, having already lifted rates twice in December.

But variable rates are much lower and expected to stay that way for years, with all the Big Four banks offering them below 2.3 per cent.

Why fixed rates are on the rise

So why are lenders hiking fixed rates?

It all comes down to what’s happening in international bond markets.

Because fixed loans require a bank to charge borrowers the same interest rate over a given period, the funding they must access to offer this product must cost them the same amount over time, too.

As a result, banks source the money that they lend to fixed-rate borrowers from international bond markets, instead of from short-term cash markets where the cost of funding is more volatile.

Banks issue one-, two-, three-, four- and five-year bonds to investors, who demand a set interest rate over that time frame.

And this is where what’s happening around the world affects how much people pay for their mortgage in Australia.

How global inflation affects local mortgage rates

Inflation is surging in the US and investors there are worried that this trend is likely to persist and that prices across the global economy will continue to rise rapidly.

As a result, they are demanding greater compensation (i.e. higher interest rates) to hold bonds (i.e. to lend to banks) to prevent higher inflation eating into their returns – and this is driving up costs for banks who are then passing on these higher costs to consumers.

A good proxy for this trend is government bond rates, which are on the rise.

“The Australian 10-year government bond is yielding 1.6 per cent,” said Laurie Conheady, fixed income specialist at JB Were.

“Back in September, it was 1.1 per cent. It got as high as 2 per cent in October and has settled back to 1.6 per cent.”

Mr Conheady said despite the falls in recent weeks “there is an expectation that they are going to move higher” due to global inflation, which means even higher fixed rates for home buyers.

The good news: Variable rates to remain low

Despite the banks putting up their fixed-term rates in recent months “the short end hasn’t really moved at all,” Mr Conheady said.

That is because the Reserve Bank is telling the world that short-term rates will stay at rock-bottom levels until at least 2023.

The RBA is holding its cash rate at a record-low 0.1 per cent and the market rate fixed with that in mind is even lower.

“The 90-day bank bill swap rate is at 0.07 per cent right now, which is under the RBA cash rate level,” Mr Conheady said.

These short-term rates apply to the funding markets from which banks source the money to supply variable mortgages.

So if they are low, then variable mortgages are low.

And they are likely to stay low in the short term, because “there is a lot of competition among the banks,” Mr Conheady said.

The RBA has also said it is unlikely to raise the official cash rate before 2023, so home buyers can expect the good times for standard variable rates to continue.

“You wouldn’t expect anything to change too much in the next 18 months,” Mr Conheady said.

And that goes for the other way, too.

The RBA has almost no room to the cut the official cash rate any lower – so just as variable rates are unlikely to rise in the short term, they are unlikely to fall either.

Sydney and Melbourne house prices cool off

January 19, 2022

Sezen Bakan| The New Daily| 4 January 2022

https://thenewdaily.com.au/finance/property/2022/01/04/property-market-price-slow/

National property prices rose by more than 22 per cent in 2021, but new data shows the housing boom in Sydney and Melbourne is running out of steam.

Figures released by CoreLogic on Tuesday show prices in December almost reached a standstill in Sydney (+0.3 per cent) and went slightly backwards in Melbourne (-0.1 per cent).

Analysts said the data suggested Australia had entered a two-speed property market, with prices flatlining in the country’s two largest cities but continuing to rise in smaller cities such as Adelaide (+2.6 per cent) and Brisbane (+2.9 per cent).

House prices continue to slow

CoreLogic research director Tim Lawless said national annual property price growth is expected to slow to between 5 and 7 per cent in 2022, down from 22 per cent in 2021, largely due to rising fixed mortgage rates and tighter lending policies.

He said Sydney and Melbourne will be the most affected, due to poor affordability and a flood of new houses coming onto the market.

Although prices rose faster in other capital cities in 2021, Sydney and Melbourne currently have the highest median property prices, with Sydney’s sitting at more than $1 million and Melbourne’s at just under $800,000.

“So clearly, affordability is becoming a lot more challenging in those larger cities where affordability was already quite challenging leading into the pandemic,” Mr Lawless said.

He said last year’s rise in prices had made life difficult for first-home buyers, who now face more than a decade of saving to reach a deposit.https://e.infogram.com/30c36435-af56-4c16-a548-b7f738390072?parent_url=https%3A%2F%2Fthenewdaily.com.au%2Ffinance%2Fproperty%2F2022%2F01%2F04%2Fproperty-market-price-slow%2F&src=embed#async_embed

But the December figures show the fastest price rises are likely in the rear-view mirror for Sydney and Melbourne.

Mr Lawless said the slowdown in the two biggest cities could partly be attributed to a rush of new listings.

He told The New Daily the number of new listings in Melbourne and Sydney were more than 30 per cent above the five-year average, similar to other markets.

But fewer houses are exchanging hands there compared to other markets with stronger price growth, such as Adelaide, Brisbane, and regional Queensland.

CoreLogic said these were the only three regions across the country “where there is no evidence of value growth slowing just yet, with the monthly rate of growth reaching a new cyclical high in December”.

Mr Lawless said although these markets will slow this year, they will continue to outperform the broader property market.

Lagging property markets playing catch-up

Strong interstate migration and better affordability meant prices rose faster in southeast Queensland, Brisbane, and Adelaide than they did in Melbourne and Sydney in 2021, according to AMP Capital chief economist Shane Oliver.

These areas are now playing catch-up after a decade of weaker growth compared to Sydney and Melbourne, without the added “baggage” of extended lockdowns, Dr Oliver said.

“They’re seeing interstate migration is positive, and property is more affordable in those ,” he said.

Dr Oliver said it is likely that Melbourne property prices have already peaked in the current cycle, or will have done by the end of January, with Sydney prices to follow by the middle of the year.

He said the cities could even see prices fall 5 to 10 per cent by the end of the year or by 2023.

However, Brisbane and Adelaide appear to be “on a roll”, and there’s potential for Perth and Darwin to continue to recover, he said.

This will split the national property market into two speeds.

“You’re going to see this ongoing divergence between cities, and in the meantime regional Australia will remain in strong demand,” Dr Oliver said.

What could change the course of the market?

Although property experts generally agree on this year’s market predictions, nothing is set in stone, especially with the ongoing pandemic.

Mr Lawless said COVID-19 is always going to be a “wildcard”.

He said a return of restrictions, especially regarding property inspections and on-site auctions, would lead to a temporary disruption of housing market trends.

This was seen in Melbourne and Sydney, which experienced a surge in listings in December after people were unable to sell their properties in spring due to lockdowns.

“When the reopening occurred, suddenly there was a flood of listings in both of those markets, which led to a surge in supply relative to demand,” he said.

“That caused the weakness in auction clearance rates and, consequently, prices weakened.”

With more than 47,000 new COVID-19 cases across the country on Tuesday, Mr Lawless said consumer sentiment and housing market activity is “very highly correlated”.

“So if there is a dent in the way consumers are feeling about their household finances or their ability to hold a job, then that will probably flow through to housing markets on the downside as well.”

House prices rise, investors return – but here’s why we don’t need a lending clampdown.

June 16, 2021

Investors are returning to the property market – but a boil-over seems a long way off.

Recent figures from Corelogic shows investors as the fastest growth segment, increasingly outmuscling First Home Buyers.

For the fifth month in a row First Home Buyers’ market share dropped.

But owner occupiers remained the largest market segment at 52.5 per cent.

But, while the headlines may indicate there is an overheating market with hoards of speculators rushing in, this is far from the truth.

First Home Buyers constitute 21.5 per cent of total borrowings for the purchase of property over April- well above the decade average of 15.7 per cent.

And banks have maintained prudent lending standards.

The portion of those riskier loans with a loan-to-valuation ratio of greater than or equal to 90% actually fell – from 11.3 per cent to 10.4 per cent.

And, while the portion of lending on interest only terms ticked up 10 basis points in the to 19.4 per cent, it remains well below the 46 per cent peak in 2015.

Origin brokers talk to banks daily and we know that they are reluctant to relax lending standard – hence debt-to-income ratios have only risen slightly – more in line the rise in house prices of the past six months than any risky behaviour from lenders.

This weekend’s clearance rate, while strong, were hardly crash-hot. Melbourne’s preliminary auction clearance rate slumped to 62 per cent and Sydney was 74 per cent. These figures typically imply that buyers are hardly clamouring to purchase a property at all cost.

There’s no doubt prices will continue to increase, but with banks restricting how much they will lend – and with fixed rates starting to inch up, it’s hard to see would-be buyers being able to stretch things much further.

Don’t miss out on these ultra-low rates

June 4, 2021

The era of ultra-low fixed interest rates in Australia might be coming to an end as the last bank with a sub-2 per cent long-term rate has hiked theirs above that symbolic mark. And Australians are being warned not to miss out on some of these great deals.

Some of the longer-term fixed rates, often four and five years, are now starting to creep higher.

Previously, 32 lenders had long-term fixed raates beneath 2-per cent, including all the Big Four, but all have raised their rates in recent weeks.

CBA were the major mover in the market, hiking their four-year rate at the same time that they lowered their two-year rate. They then upped their three-year and four-year rates at the end of May, signalling to the market that Australia’s biggest bank were anticipating a higher price of doing business in the middle-to-long term.

The main driver of this is the fact that the ultra-low rates the Reserve Bank is lending to Australia’s banks are coming to an end.

At height of the Covid pandemic, the Reserve Bank announced a $200bn Term Funding Facility (TFF) – in effect a war chest of money it could lend to the banks at 0.1 per cent. This dramatically changed the way Australians borrowed money. But, slowly, as we start returning to normal, the TFF is being wound back with consequent implications for borrowers.

Traditionally, the banks raise around $100 billion a year in wholesale funding from foreign and local investors but, due to the cheap money of the TFF, that reduced sharply to about $5 billion in the local market and $15 billion internationally.

As, the TFF is wound back, the return to normal may catch some borrowers unaware.

Fixed loans now represent about 35 per cent of all new mortgages. That represents a more than doubling of the level of fixed loans compared to before the pandemic as home buyers locked in loans, sometimes, below two per cent.

The Reserve Bank’s withdrawal of the TFF will mean the banks will be forced to source finance from the more expensive wholesale funding – with a consequent rise you and I pay for our home loans.

Rates will stay low for quite some time, but if you want to make the most of these ultra-sharp rates, now maybe time to talk to your broker about locking in a fixed rate.

There are some loans on the market with a rate less than two per cent – but who knows for how much longer.

Why you could shoot yourself in the foot by choosing the cheapest mortgage.

June 4, 2021

Want to lose that home? Then get the cheapest loan.

It sounds hard to believe, but you could lose out if you opt for the lowest interest rate.

Recently, Origin brokers have expressed concern that some of the banks are taking about a month to even look at an application! Imagine if you were relying on one of these banks to finance the purchase of your dream home!

In fact, only Virgin, ING and Macquarie are consistently taking less than 10 days to approval.

In an ultra-competitive loan market, many banks are offering really low rates, which prove to be a false economy if the would-be borrower loses out on their dream property.

Typically what happens is, when banks offer really low rates, they get inundated with loan applications that they can’t keep up with.

This week, one ING boss said his bank was geared to handle 400 applications a day and made a point of not having offers in the market that risked overwhelming processing.

“Those 400 applications could become 800 applications in one day and if you are only staffed up for 400, then that puts a lot of pressure on us,” he said.

You may think you are wise going for the lowest rate. But if your bank can’t deliver in time while the market is growing at an annual rate of 10 per cent, you may lose out on tens of thousands of dollars by having to buy property which has become more expensive.

Expecting the government to cool house prices? Don’t hold your breath

April 6, 2021

Last month saw bumper returns in the housing market, prompting some to ask whether the government will intervene to cool things down as has recently happened in NZ

But those who are expecting a clamp-down don’t understand how lending works nor how a rising property market is key to the Reserve Bank’s plans for our economy’s growth.

Sydney property recently experienced 3.7 per cent growth – the last time it hit more than 3 per cent monthly growth was in August 1988. And all capital cities also experienced growth.

Many economists predict price growth of around 15 per cent for the period up to the end of 2022, which has prompted angst regarding housing affordability with many expecting the banking regulator (APRA) to step in to limit how much can be lent.

But, at a recent parliamentary enquiry, the APRA Chairman emphasised that it was the regulator of the banks not property. He told Canberra “It’s not our job to solve house prices and it’s not our job to solve house pricing affordability. The extent to which there is dynamic emerging of increased risk taking by the community … at this stage it’s not evident”

Most brokers will tell you that the banks are still taking a prudent approach to lending: debt-to-income ratios and loan-value-ratios still remain low. In truth, the reason why Australians can borrow more is because interest rates remain low – and if prices continue to rise, many wont be able to borrow enough. In itself, this will act as a brake on the property market.

But higher house prices are part of a recovery scenario for the Reserve Bank as it aims to lift inflation back to its 2 to 3 per cent target range.

And the wealth effect is key to Australia’s growth. The wealthier we feel, the more likely we are to go and spend on other products and services.

As such the Reserve Bank of Australia has a firm commitment to a 0.1 per cent cash rate until at least 2024.

The Reserve Bank of New Zealand did recently announce changes so that borrowers must now have a 30 per cent deposit. And, by May, investors can only borrow up to 60 per cent of a property’s value.

But the NZ property market is more dominated by investor than ours

Expecting the government to cool house prices? Don’t hold your breath

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

Newcastle, Pittwater, Gosford

Tight markets

Why fixed rates are on the rise

How global inflation affects local mortgage rates

The good news: Variable rates to remain low

House prices continue to slow

Lagging property markets playing catch-up

What could change the course of the market?

At Origin Finance, We Put You First