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Breaking out of mortgage prison: can easing serviceability buffers help?

Breaking out of mortgage prison: can easing serviceability buffers help?

Have you been keen to refinance but told you can’t? You’re not alone. Many Australian households are currently locked into their home loans due to rising interest rates. But some banks have recently started to lower their serviceability thresholds. 

As interest rates have climbed, Australians have refinanced in unprecedented numbers.

In fact, a record high of $21.3 billion in refinancing took place in March 2023, according to ABS statistics – 14.2% higher compared to a year ago.

But some people are now unable to refinance and take advantage of potential savings because they don’t meet lender requirements.

They’re locked into what’s called “mortgage prison”.

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Homebuying intentions climb as Aussies untie themselves from rental crunch

Homebuying intentions climb as Aussies untie themselves from rental crunch

Despite the soaring cost of living and successive interest rate hikes, homebuying intentions have climbed, latest data shows. So why are so many people still chasing the great Australian dream? And what can you do to make your own dream a reality?

Despite a flurry of rate rises, new data this month shows homeownership is once again a top priority for many Australians, with the number of house hunters increasing.

Commonwealth Bank’s Household Spending Intentions Index showed a strong 14.4% increase in homebuying intentions in May, after dropping in April.

May also saw new home sales increase across Australia for the second month in a row.

So what’s driving this appetite for property when finances are increasingly tight for many? And how can you boost your own chances of cracking the market sooner?

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Mortgage serviceability: how to jump through the hoops

Mortgage serviceability: how to jump through the hoops

Mortgage serviceability can feel like a frustrating hurdle to clear. But it’s an important safeguard against borrowing too much, particularly in the current interest rate landscape. 

It’s in the best interests of all parties involved if your mortgage is chugging along with regular repayments being made.

Borrowing an amount you don’t have a hope in hell of repaying can mean heartache for you, and can land your lender and broker in hot water.

Enter mortgage serviceability.

Before approving your loan application your lender will take a good look at your finances to see if you can meet repayments.

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RBA attempts to beat back inflation with another rate hike, up to 4.10%

RBA attempts to beat back inflation with another rate hike, up to 4.10%

Drumroll … The RBA has hiked the official cash rate for the 12th time since April 2022, increasing it to 4.10%. How much will this increase your monthly repayments? And how long does Philip Lowe plan to keep marching to this beat?

Another month, another 25 basis point cash rate rise. It’s now apparent the cash rate pause back in April was nothing but a false peak.

Reserve Bank of Australia (RBA) Governor Philip Lowe explained in a statement that while inflation in Australia had passed its peak, at 7% it was still too high and it would be some time yet before inflation was back in the 2-3% target range.

“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe,” he said.

Governor Lowe added that some further tightening of monetary policy may be required to ensure that inflation returned to target in a reasonable timeframe, but that would depend upon how the economy and inflation evolved.

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Is the property market starting to rebound?

Is the property market starting to rebound?

Navigating the Australian property market over the past year has felt like standing on shifting sands. But is the market starting to regain stability? And if so, what can you do now to make sure you’re ready to buy?

Anyone with an eye on the property and finance market over the past few years has seen their fair share of thrills and spills. It’s been anything but uneventful.

But with the RBA’s rapid-fire rate hikes slated to peak in 2023, is there a property upswing afoot?

Westpac’s economists seem to think so – they’re predicting that the housing correction is winding down. The bank forecasts that Australian property prices will grow by 5% in 2024 after stabilising throughout 2023.

So this week we’ve looked into data from some of Australia’s leading property market and finance institutions.

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Property valuation: what you need to know when buying a home

Property valuation: what you need to know when buying a home

When buying property, it’s good to know the market value. After all, you want to know you’re paying a fair amount. But the property’s value is an important consideration for your lender too. And their valuation may be quite different.

Just how much is a property worth? Well, it depends on who’s asking.

When buying a property you’ll find there are different terms to estimate how much it’s worth, including market value, market appraisal and bank value.

And you’ll most likely find they can differ, which can be confusing.

Fortunately, we’ve got the low down to help you understand the difference. And how bank valuations affect your loan.

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Heads up business owners: the asset write-off deadline is looming!

Heads up business owners: the asset write-off deadline is looming!

Business owners wanting to buy a vehicle, asset or important piece of equipment and immediately write off the full cost have just over a month to act.

That’s because the temporary full expensing scheme is set to expire on 30 June 2023.

It will be superseded by a much less generous scheme, known as the instant asset write-off, so if your business could do with expensive new equipment, an asset or commercial vehicle, you might want to act quick!

What is temporary full expensing?

Temporary full expensing is similar to the popular instant asset write-off scheme, but with an expanded scope.

Originally a stimulus measure to address the effects of the COVID-19 pandemic, the scheme allows businesses to make significant asset investments.

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More home buyers set to benefit from low deposit, no LMI schemes

More home buyers set to benefit from low deposit, no LMI schemes

More Australians (and permanent residents!) will soon be eligible for a leg up into the property market under an expanded Home Guarantee Scheme. Today we’ll run you through all the upcoming changes to the low deposit, no lenders mortgage insurance scheme.

Officially unveiled as part of the 2023 federal budget, the expanded Home Guarantee Scheme will have broader eligibility criteria from 1 July 2023.

So if you’re a single parent or guardian, first home buyer, haven’t owned property for a decade, permanent resident, or looking to buy a home with your friend or sibling – be sure to read on to find out if you’re eligible.

What is the Home Guarantee Scheme?

Getting a deposit together can be a massive hurdle when buying a home.

And if your deposit is lower than 20%, you can get stung with lenders mortgage insurance (LMI), which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

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Homeowners brace as RBA raises cash rate to 3.85%

Homeowners brace as RBA raises cash rate to 3.85%

The Reserve Bank of Australia (RBA) has increased the official cash rate for the 11th time in the past year, taking it to 3.85%. Have we finally reached the peak of this cycle? And how much will this latest rate hike increase your monthly repayments?

In what will undoubtedly be tough news for many households around the country, this latest rate hike comes despite many pundits predicting the RBA would keep the cash rate on hold for at least another month.

RBA Governor Philip Lowe said while inflation in Australia had passed its peak, at 7% it was still too high and it would take some time before it was back in the target range of 2-3%.

“Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today,” he said.

However, in what may come as welcome news to mortgage holders, Governor Lowe softened his language around the possibility of further rate hikes.

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Tips to help stay on top amidst the rate hike cycle

Tips to help stay on top amidst the rate hike cycle

With every RBA rate rise announcement, mortgage holders brace themselves for impending repayment increases. Here’s how to stay on top of your mortgage and feel financially secure.

Let’s face it, the RBA’s rate rise cycle hasn’t been easy for mortgage holders, with average monthly repayments now hundreds of dollars (and in some cases, thousands of dollars) more expensive than they were a year ago.

Pair this with the rising cost of living and many Australians are eager to bolster their finances to weather the storm, especially as there are one or two more rate rises predicted to come.

But rest assured, there are things you can do to help manage your mortgage and stay on top of your finances.

1. Review your loan

Regularly reviewing your loan can help you assess whether it’s best suited to your current situation.

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Property listings and prices are bouncing back

Property listings and prices are bouncing back

As property prices start to climb, listings are following suit. So if you’re hunting for a home, what does this mean for you?

If you’ve been looking at the property market over the last six to 12 months, you probably already know that while property prices have dropped, it’s been a case of slim pickings due to the drastically low number of listings.

But prices look like they are starting to bounce back, with March heralding a 0.6% increase in national property prices, according to CoreLogic. And listings are following suit.

PropTrack data for March showed new listings on realestate.com had risen by 10.5% month-on-month, making it the busiest month for new listings since May 2022.

So why has the market changed? And what does it mean if you’re looking to buy?

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What is the fixed-rate cliff and how can refinancing help?

What is the fixed-rate cliff and how can refinancing help?

You’ve probably heard the term “fixed-rate cliff” bandied about in finance news feeds. But what is it? And if you’re about to head over it, how can you prepare for a soft landing?

A staggering 880,000 fixed-rate loans are set to end this year, and when they do, many Australian households will be facing significantly higher mortgage repayments.

That’s because the variable interest rates now on offer are much higher than the fixed rates locked in years ago.

So today we look at what this so-called “cliff” might mean for your budget and how you can reduce the impact by refinancing.

But first, why is the fixed rate cliff looming in 2023?

Before 2020, fixed-rate mortgages equated to about 20% of total Australian home loans.

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Mortgage holders granted a reprieve as RBA puts interest rates on hold

Mortgage holders granted a reprieve as RBA puts interest rates on hold

And … exhale. After 10 straight rate hikes the Reserve Bank of Australia (RBA) has today decided to put the official cash rate on hold. But for how long?

The decision to keep the official cash rate at 3.60% will be welcomed by homeowners around the country after monthly repayments increased by about $1000 per $500,000 loaned (for a 25-year loan) since 1 May 2022.

RBA Governor Philip said the RBA board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.

“The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” he said.

However, while the cash rate was not increased at today’s RBA meeting, Governor Lowe signalled there might be more rate hikes in the coming months.

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Money habits that may raise lenders’ eyebrows

Money habits that may raise lenders’ eyebrows

We all know being on our monetary best behaviour can help to land a home loan. But did you know there are common spending habits you may have that are red flags to lenders?

Smart money management and cutting back on expenses can help your home loan application. That’s no secret.

But a bit of measured discretionary spending can add a little spice to life. We’re human after all. And lenders will see this as normal.

However, there are certain spending habits and types of transactions that can be a red flag to lenders. And these may hinder your chances of home loan approval.

Check out our list of potentially problematic spending habits below; avoiding them just might make all the difference when you apply for your next home loan.

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Time to jump in? First home buyer deposit saving times plunge

Time to jump in? First home buyer deposit saving times plunge

Home loan headlines have been, let’s face it, a bit of a downer of late. But the good news is that first-home buyers are now reaching their 20% deposit goal faster.

First home buyers have been delivered a bit of well-deserved good news with the findings of the 2023 Domain First Home Buyer Report.

The analysis shows that first-home buyers aged between 25 to 34 are hitting their house deposit saving goal more quickly compared to April 2022 – a month before the first of ten consecutive cash rate hikes.

State-by-state breakdown

Sydney experienced the biggest decline – a whopping 17-month drop in average deposit-saving time frames, with it now taking 6 years and 8 months to save a deposit compared to 8 years and 1 month in April 2022.

Brisbane (now an average of 4 years to save a deposit) and Canberra (now 6 years) came in second, both experiencing a 14-month drop.

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Got an eagle eye on house prices? Rate rises are only part of the story

Got an eagle eye on house prices? Rate rises are only part of the story

Rate rises can affect the property market, as we’ve all seen of late. But there are other factors that appear to hold longer-term sway over national house prices.

In a bid to bust inflation, the Reserve Bank of Australia (RBA) has been on a rate rise run that’s seen the official cash rate go from a record-low of 0.10% to 3.60% in just 10 short months.

Along the way, we’ve seen property prices across Australia decline.

As rates rose, Australia saw the largest and swiftest property price drop on record, with a 9.1% fall from April 2022 through to February 2023.

But a recent study by Domain, which examined 30 years of data, suggests that population and migration growth have greater and more long-lasting effects on property prices.

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Homeowners feel the pinch as RBA lifts cash rate to 3.60%

Homeowners feel the pinch as RBA lifts cash rate to 3.60%

The Reserve Bank of Australia (RBA) has increased the official cash rate for a tenth straight meeting, taking it to 3.60%. How much will this rate hike increase your monthly mortgage repayments, and how many more rate rises are expected to come?

The RBA’s latest move takes the cash rate to its highest level since May 2012.

However, in somewhat hopeful news for mortgage holders, RBA Governor Philip Lowe has softened his language around the timing of future rate hikes.

While last month he said “further increases in interest rates will be needed over the months ahead”, no such statement was included in this month’s rate hike announcement.

In assessing when and how much further interest rates need to increase, Governor Lowe said the RBA board will be “paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market”.

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The latest twist in the tale of national property prices: explained

The latest twist in the tale of national property prices: explained

The property market has had more plot twists than a daytime soap opera in recent years. So getting the skinny on current trends is helpful when you’re planning to buy. Here’s the lowdown on the latest surprising bit of data.

Despite all the media doom and gloom predicting that the Australian housing market would tank in 2023, national property prices actually rose ever-so-slightly in February.

So what the heck is going on?

Property price trends

You may have heard it’s been a bit of a buyer’s market in recent times. Over the past 12 months, property prices were down 7.2%, the biggest annual drop since May 2019.

With rising interest rates, buyer demand slowed. This saw properties sitting on the market for longer.

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Take the heat off rate hike fears with these 4 tips for buyers

Take the heat off rate hike fears with these 4 tips for buyers

Have recent rate hikes made you nervous about taking the plunge into the property market? You’re not alone; it’s a buyer’s market for a reason. Here’s how to stay cool and calm when buying your next property. 

As you’ve probably seen in the news, the Reserve Bank of Australia (RBA) has increased the official cash rate from 0.10% to 3.35% in just nine months.

It’s now the highest it’s been since September 2012 – so it’s only natural to feel a bit hesitant about buying property right now.

But rest assured with the right buying strategies in place, you can navigate rate hikes and mitigate potential financial stress.

1. Know your borrowing capacity

Get to know your borrowing capacity, and consider leaving yourself a bit of a buffer by purchasing under the maximum amount.

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How to prepare for a fixed-rate mortgage cliff

How to prepare for a fixed-rate mortgage cliff

Do you have a fixed-rate mortgage contract that’s coming to an end soon? It can be a stressful time, particularly with rate rise news dominating the headlines. So today we’ve got some tips for a smooth transition.

Like many Australians, you may have taken advantage of the interest rate good times by locking in a cracking rate.

But as they say, all good things must come to an end.

Indeed, the Reserve Bank of Australia (RBA) has estimated that 800,000 fixed-rate loans will end this year.

If that includes your loan, below are some tips to help you navigate the transition to higher repayments smoothly.

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