Monthly mortgage payments fall $254 in five months

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Nicole Pederson_McKinnon| Sydney Morning Herald| 19 May 2016

It’s not going to be much consolation to frustrated would-be first-home buyers, but repayments on the average new mortgage are $254 less than they were at Australia’s borrowing peak in November.

Yes, the saving’s partly courtesy of the May budget day rate cut, which is to be mostly passed through to home loan customers – says the average fall will be 22 basis points to 4.9 per cent (prior to any discount you can negotiate).

But it’s also due to a rapid decline – amid a lending crackdown and concern about prices – in how much buyers are borrowing.

Just five months ago the average loan size across Australia was threatening to breach $400,000 on ABS figures ($392,700). Today it’s $361,400, an 8 per cent drop.

Of course, this masks huge regional differences. If it’s in NSW you’re interested in buying, people are borrowing 10.6 per cent less at an average $418,000, in Victoria they’re committing to an 8.1 per cent lower $366,400 and in Queensland they’re limiting loans to $312,900 (down 3.9 per cent).

It’s a good guide for what to pay (bearing in mind the figures are what people were willing to borrow in March, pre-rate cut).

But it still leaves buyers with $2092 in mortgage repayments, on average, to find each month. To be safe, those $2092 repayments shouldn’t wipe out more than one third of your before-tax monthly salary either.

Then there’s the small issue of the massive deposit you need before you can contemplate that. A 10 per cent deposit would be $40,156 on current average borrowings of $361,400 (and you’ll need cash for costs on top), affording you a $401,556 property.

Perhaps it’s just all too much – or, more accurately, too little. But if you’ve been priced out, there may be left-of-field ways to somehow get in.

  1. Aim higher

There are a growing number of people around the world who have no expectation of being able to afford a house and instead live in apartments; certainly in countries such as Japan this is often the norm. What’s more, it’s widely considered that in Australia there will soon be an apartment glut – and subsequent price fall. The effect is probably already captured in the borrowing figures: if we look at new dwellings only (the above chat is about established dwellings), loan amounts are down a much larger 15 per cent in NSW, 16.2 per cent in Victoria and 10.2 per cent in Queensland. Bide your time – I mean a year or possibly three – and you may pick up a bargain close to the city/ river/beach.

  1. Embrace your family

I don’t mean get your parents to buy you a house… if only! But could you live, separately, with them? This might seem an extreme option but multi-generational living, where parents, adult children and possibly grandparents reside quite independently under the same roof, is growing in popularity. Just consider carefully whether to buy as joint tenants or tenants-in-common and make a watertight legal agreement for how and when you’ll sell. Personally I’d stop short of what many newlyweds are doing in Hong Kong, which Demographia says has the least affordable property in the world (followed by Sydney, with Melbourne not far behind on the list): new husbands and wives continue to live with their respective parents! The Hong Kong Ideas Centre says the practice has hit a record high.

  1. Become a life-long landlord

How do you feel about forever renting in places you want to live and investing in more affordable property, possibly in the regions? This is for a column after the election, when we know whether there will be changes to negative gearing (Labor wants to curb it) and have a better idea of the impact on prices (right now the debate is mainly barrow pushing). But it may be a valid strategy.

  1. Fly-in-fly-out

The mining boom turned this into a buzz phrase but try thinking about it differently. Three years ago I did… and relocated to Queensland’s Sunshine Coast. It doesn’t matter where I am to write, I can do most TV engagements from local studios and it’s a quick “commute” to present at schools in Sydney, Canberra, Melbourne and more. Indeed, the flight to Sydney is the same length as the time it used to take me to drive at peak hour the 6km between Bondi and the inner-city office (and drop off my young son on the way). And the probable $1 million we saved on our five-bedroom house will cover an awful lot of cheap airfares.

What are your out-there property options?

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