To fix, or not to fix, indeed that is the question on the minds of many Australian home owners, since the RBA increased the cash rate 7 times over the last 7 months.
With leading economists expecting the RBA to increase the cash rate by a further 1% in the near term, it is no wonder many clients are looking to switch their variable rate home loans to fixed rate home loans. If you are considering the same action, here are a few key points to consider:
Reasons to Fix your Home Loan
• Provides repayment-certainty during the fixed rate period.
• Protects you against interest rate rises during the fixed rate period.
• Helps with accurate budgeting.
• Can help to provide peace of mind.
Reasons Not to Fix Your Home Loan
• Additional repayments are limited by most lenders.
• Redraw is limited and not all lenders provide this option.
• Offset accounts are not linked to fixed rate loans – although there is one lender on our panel that does.
• You won’t benefit from any interest rate drops during the fixed rate period.
• Exit costs and penalty fees for changing or closing a fixed home loan may apply.
Where to next if you would like to fix your home loan or investment loan?
• Visit our home loan comparison website to compare 100s of fixed rate home loans.
• Contact us to discuss your options.
• Speak with your existing lender.
CBRE hails Australia’s strong real estate market
One of the world’s largest real estate firms has given five very good reasons why “Australian real estate represents a compelling investment”.
1. CBRE said Australian real estate has provided an average return of 9.5% per annum over the past decade – significantly higher than the average home loan interest rate during that period.
2. Rental vacancy rates are below 1% in some cities. When supply is low, demand is high, which is translating into “robust rent growth”.
3. Australia’s population is forecast to grow 14% between in 2021-2030, which would be the “highest amongst leading economies”. More people would mean more demand for real estate.
4. Australia has a “strong” and “resilient” economy, which makes it a good place to invest.
5. Local real estate is relatively easy to sell if you decide you want to cash out. CBRE said Australia ranks sixth in the world on the dollar value of property transactions.
Please don’t hesitate to reach out if you would like to chat about financing an investment property.
Rents rising fastest for large houses and small units
As any property investor could tell you, rents have grown strongly over the past year.
But when you drill down into the data, as realestate.com.au did, you discover that some types of rental properties have been more in-demand with tenants than others.
Between the September quarters of 2021 and 2022, demand was higher for houses (which experienced an 11.1% annual increase in rents) than units (7.1%).
Drilling down further, by bedroom size, it turns out that houses with more bedrooms were more popular than those with less:
• 2 bedrooms 7.7% annual growth
• 3 bedrooms 9.3%
• 4 bedrooms 12.0%
• 5 and more bedrooms 11.4%
For units, the results were different:
• 1 bedroom 11.1% annual growth
• 2 bedrooms 8.4%
• 3 and more bedrooms 10.0%
Whether you want to buy an investment property to take advantage of these rising rents or buy your first home to escape them – we can assist with the funding aspect of the transaction.
One of the most important parts of buying a property is securing finance. We can help you to compare 100s of home loans to save, present multiple options for your consideration, help structure your loan correctly and manage the application process for you.
New housing accord to deliver 1m new homes
The federal government has rolled out a new policy to address what it calls “one of our nation’s biggest economic challenges” – housing affordability.
The National Housing Accord, which was unveiled in the recent Budget, aims to improve affordability by building one million new well-located homes over five years from 2024.
What makes the accord unique is that, for the first time, it aligns the efforts of governments, institutional investors and the construction sector.
The role of the construction sector will be to build homes that are more energy-efficient and to train more apprentices.
Institutional investors, like superannuation funds, will be expected to fund development projects “for their members’ interests and for the national interest”.
As for governments:
• The federal government will provide financing options to facilitate institutional investment in social and affordable housing
• States and territories will expedite zoning, planning and land release for social and affordable housing
• Councils will deliver planning reforms and free up land for new builds
If you would like to build or purchase a new home, it’s important your finances are in order to maximise your borrowing capacity and improve the chances of qualifying for a loan – here are a few ways to to help:
• pay your bills on time
• reduce any unnecessary expenses
• reduce or cancel credit card limits
• payout any buy now pay later loans
• review and payout any HECS debt (if the balance is low)
• increase your income.
Home builders working through “record pipeline” of projects
There are a record number of homes under construction, according to the latest data from the Australian Bureau of Statistics.
A total of 241,926 home builds were underway in the June quarter, which was up 0.7% from the previous record result recorded in the quarter before.
On the surface, that would suggest the federal government’s plan to build one million new homes (see previous story) in five years is realistic.
However, as Housing Industry Association economist Tom Devitt pointed out, there are “more houses still being commenced than completed”, which means this “record pipeline” of building work is due to limited supply rather than overwhelming demand.
“Supply constraints are continuing to hold back completion of these projects. Material constraints have plagued builders over the last two years, and shortages of skilled trades have only become more acute,” he said.
“These supply constraints will keep Australia’s home builders busy this year and next as they continue to work down this record volume of detached house projects.”
If you are buying, re-financing or have any questions, contact me on the below information.
TAG Finance and Loans
Sal Cinque | CEO
03 9886 0800 | loans@tagfinancial.com.au
Disclaimer: The information contained on this page is general in nature. Professional advice should be sought before acting on any aspect on this page. TAG Finance and Loans Pty Ltd ABN 25 609 906 863 Credit Representative Number 483873 National Mortgage Brokers Pty Ltd ABN 88 093 874 376 Australian Credit License 391209.