Help to Buy Scheme set to kick off in 2024

The highly anticipated Help to Buy Scheme will kick off next year, giving more Aussies a chance to score their dream home. Today we’ll unpack how the new federal government scheme will work, who it’ll benefit, and the fine print you need to know.

A key election promise of the Albanese government, Help to Buy is a shared equity scheme aimed at helping 40,000 low and middle-income earners buy a place of their own (10,000 allocations per year).

The scheme involves the government making an equity contribution worth up to 40% of the value of a new home, or 30% of the value of an established home.

But that doesn’t mean Anthony Albanese will be rocking up unannounced to claim the guest bedroom, as we’ll explain further below.

Homebuyers need a minimum 2% deposit, and must be able to qualify for a home loan with a participating lender to fund the balance of the purchase. No lenders mortgage insurance is payable.

Homebuyers can choose to boost their stake in the property at any time, and the government won’t charge rent on its share of the home.

Who is eligible for Help to Buy?

Help to Buy is not limited to first homebuyers.

You do need to be an Australian citizen, and you can’t currently own your home or have a share in a residential home.

Income limits apply too. Singles can earn up to $90,000 annually, or up to $120,000 for couples.

Help to Buy property price limits

Property price limits apply for Help to Buy across state capitals, regional centres and ‘rest of state’ areas. The price caps are shown below.

NSW capital city and regional centres: $950,000
Rest of state: $600,000

VIC capital city and regional centres: $850,000
Rest of state: $550,000

QLD capital city and regional centres: $650,000
Rest of state: $500,000

WA capital city and regional centres: $550,000
Rest of state: $400,000

SA capital city and regional centres: $550,000
Rest of state: $400,000

TAS capital city and regional centres: $550,000
Rest of state: $400,000

ACT: $600,000

NT: $550,000

Regional centres are Newcastle and Lake Macquarie, Illawarra, Central Coast, North Coast of NSW, Geelong, Gold Coast and Sunshine Coast.

How much can I save with Help to Buy?

Under Help to Buy, homebuyers can take out a much smaller home loan. This provides valuable savings in loan repayments and interest costs.

The federal government estimates homebuyers can save up to $380,000 on a new home purchased through the scheme, or as much as $285,000 on an established home.

The fine print to be aware of

For low and middle-income earners struggling to buy a home, Help to Buy may be a game-changer.

But before you rush in, bear in mind that the scheme will see you share a stake in your home with the government.

So if or when you decide to sell the property, the federal government will put its hand out for a slice of the sale proceeds.

In this way, you won’t get the full benefit of the property’s long-term price growth, but rather a share of the profits in line with the proportion of ownership you hold.

Now’s the time to start planning

With Help to Buy due to launch next year, now’s the time to start planning.

If it’s something you might be interested in, don’t delay reaching out to us to find out more – it’s bound to be popular, and places are limited, so you’ll want to start preparing now.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

More Aussies turn to mortgage brokers for a hand managing hikes

An avalanche of rate hikes over the past 18 months has supersized home loan repayments. But savvy homeowners aren’t panicking. In fact, more mortgage holders than ever before are reaching out to brokers for expert help.

A recent survey by the Mortgage & Finance Association of Australia (MFAA) shows 95% of mortgage brokers are meeting with homeowners who have never used a broker before.

And it’s a move that’s paying off.

The MFAA reports nine out of ten brokers have successfully secured a rate discount for their clients this year.

And more than eight out of ten have helped their clients refinance to a new lender.

It just goes to show that if you’re struggling with mortgage repayments, you don’t have to go it alone.

How much could you slash from your home loan?

Part of a broker’s service involves contacting your current lender to negotiate a lower rate.

But if they don’t come to the party, real savings action can lie in refinancing.

Mozo has done the sums on the savings potential of switching from the average variable rates (6.60% for owner-occupiers; 6.96% for investors) to one of the lowest rate loans on the market.

They found that homeowners and investors in capital cities across the country who switch to a new lender can slash their repayments by $474 per month, on average

That’s as much as $5,691 annually.

Now, the lowest rate loan might not be available to you in your situation (we’d have to help you check), but it does highlight that there are big savings to be made if you can refinance to a lower rate.

What if you have a fixed-rate home loan?

You’ve probably heard about the ‘mortgage cliff’ – it’s a term used to describe the financial shock that homeowners can face when their super-low fixed rate comes to an end.

And we’re not out of the woods (or away from the cliff) just yet.

The Reserve Bank of Australia says around one million borrowers will come off a fixed rate over the next 18 months.

Crazy thing is, a Finder survey shows more than one in ten people with a fixed rate home loan are in the dark about when their fixed rate will end.

That matters because skyrocketing interest rates mean the average mortgage holder farewelling a fixed rate could face a $1,677 hike in their monthly loan repayments.

So if you’re on a fixed-rate home loan, it might be worth checking when the fixed rate period is due to end, and if it’s soon, what options are available to you.

Time to call in the experts

No matter whether you’re feeling the pressure of higher rates, thinking of refinancing, or unsure about what’s happening with your fixed rate, it’s important to reach out for expert help.

Give us a call today for a helping hand with your home loan.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Sneaky rate hikes – is your lender behind them?

The Reserve Bank (RBA) may have kept the cash rate on hold but that hasn’t stopped some lenders from hiking their variable home loan rates. Here’s how borrowers are fighting back.

Home owners may be celebrating two months of the RBA cash rate staying on hold. But don’t pop the champagne cork just yet.

Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm.

These hikes, known as ‘out-of-cycle’ rate rises, can fly under the radar.

So it’s important to keep an eye on what your lender is doing.

Who’s hiking rates?

Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate has stayed on hold.

In some cases the upticks may be as little as 0.03% – but some lenders have lifted their variable rates by as much as 0.15%.

On a $500,000 loan that could mean paying an extra $750 each year.

And right now every penny counts.

As a result, some home owners are taking matters into their own hands to help stay afloat.

One in two have changed their loan payments

Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:

– 35% are reducing extra repayments,
– 29% are stopping extra loan repayments altogether,
– 26% are tapping into redraw or offset funds to help with repayments,
– 22% are refinancing to a lower rate loan, and
– 12% are extending their loan term.

Other changes involve switching to interest-only repayments, as well as more drastic moves such as selling a home or investment property.

Be warned though, altering repayment strategies can come at a cost

While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.

Reducing or stopping extra payments, for example, means you’ll likely have your home loan longer and therefore pay more interest.

Likewise, if you tap into your redraw or offset funds, you’ll pay more interest each month.

Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.

What can you do?

Those sneaky out-of-cycle rate hikes aren’t just annoying. They can leave you out of pocket while beefing up your lender’s profits.

But you don’t just have to wear the cost.

The first step is knowing the rate you’re paying.

Check your loan statements, or ask us to investigate for you.

If you’re not happy with the rate, we can help ask your current lender for a discount.

And if they don’t come to the party, we can help you weigh up the possible costs of making a switch.

We can help you crunch the numbers to reveal which strategy will help you save today – and tomorrow.

So give us a call to find out if your lender is quietly lifting your loan rate and what you can do about it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Has the tide turned? What the RBA rate pause means for homeowners

Mortgage holders rejoice – the Reserve Bank of Australia (RBA) kept the cash rate on hold in August for the second month in a row. So have we finally reached calmer waters? Or is there one last rate rise wave headed our way? 

In what many will see as better news than a Matildas’ World Cup win, the RBA held interest rates steady in August for the second month in a row.

After a relentless string of rate hikes (12 since April 2022), homeowners may be sceptical about what’s happening.

So is the RBA board finally satisfied we’ve endured enough rate hikes? Or is RBA Governor Philip Lowe saving one last rate hike for mortgage holders as a parting gift before he vacates his position next month?

Let’s take a closer look at some of the underlying data.

Inflation pressures are easing

The RBA has made it clear that it has been hiking rates to help lower inflation.

So it was welcome news this week when the Australian Bureau of Statistics announced that annual inflation has dropped to 6.0%.

It’s fair to say most of us wouldn’t normally celebrate goods and services prices rising 6% over the past year.

However, it’s a sign that inflation is still falling from its peak of 7.8%, and that’s exactly what the RBA has been aiming for.

Why the rate pause?

The RBA knows it’s treading a fine line with interest rate decisions. At its August board meeting the central bank explained why it kept interest rates in a holding pattern:

– It can take time for the economy to respond to previous rate hikes.

– The outlook for household spending is uncertain. Many households are experiencing a squeeze on their finances. Others are benefiting from rising housing prices and higher interest income.

– Consumer spending has slowed “substantially” due to cost-of-living pressures and higher interest rates.

The tide might be turning, but is one last rate rise wave coming?

Inflation is down. Rates are steady.

So far, so good.

But we may not be in calmer waters just yet.

As this diagram shows, inflation is still well above the RBA’s target range of 2-3%.

So the RBA has left the door open for further rate hikes depending on how the economy is tracking, and of course, what happens with inflation.

Indeed, the RBA said as much in its latest rate announcement: “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe”.

So … what’s the rate outlook?

As mentioned earlier, RBA Governor Philip Lowe will vacate the top job on September 17 and be replaced by his deputy, Michele Bullock.

Thus, one might think that if any more rate rises were planned in the short term, they’d take place before that transition occurs to help give Ms Bullock a clean slate to work from (assuming inflation data continues on a downward trend). And there’s only one RBA board meeting between then and now – on September 5.

Indeed, Westpac has made a bold call, saying we could be heading into a lengthy period of stable rates ahead of a rate cut, possibly in the second half of 2024.

So, with any luck, we could be through the thick of it.

Then again, all things considered, interest rates are now much higher than they were 18 months ago and will likely remain so for some time.

So if it’s been a while since you last looked at your home loan and current interest rate, call us today to make sure you’re paying a competitive rate on a loan that’s well-suited to your needs.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Why are fixed rates still rising? And when might they drop again?

With plenty of pundits tipping interest rates will start to fall in the next 12 months, we look at why the big banks are hiking their fixed rates – and unpack what it means for the rate outlook.

The past few months have seen interest rates on fixed home loans deliver more ups and downs than a rollercoaster.

As recently as April 2023, a number of lenders were starting to cut their fixed rates.

Fast forward to July, and the major banks – NAB, Westpac, ANZ and the Commonwealth Bank – have all upped their fixed rates in the past fortnight.

Now you won’t find a fixed rate below 6% among the big four banks.

But aren’t interest rates expected to fall?

Home owners battling high rates are generally being urged to “hang in there” because interest rates are expected to slide down from their current highs over the next 18 months.

Westpac is predicting the Reserve Bank’s cash rate will drop to 3.85% by the end of next year.

Better still, NAB is anticipating the cash rate could dip to 3.10% by late 2024.

So … why are fixed rates rising then?

Some lenders are stepping up their fixed rates because they believe rates may go higher before they trend lower.

NAB and Westpac are both tipping the cash rate, currently sitting at 4.10%, could go as high as 4.60% by the end of the year.

Over at the Commonwealth Bank, the expectation is for one more rate hike, taking the cash rate to 4.35%, with a chance the cash rate may ratchet up to 4.60%.

This can all be confusing. The main point is that the prospect of rates heading higher before they head south again is a key factor driving some fixed rates higher.

What should I do?

The first step is to bear in mind that forecasts are just that – predictions. Not even the banks have foolproof crystal balls.

And the recent news that inflation slowed in the June 2023 quarter, with quarterly price rises being the lowest since September 2021, could see the Reserve Bank ease back on the interest rate dial. It could even bring fixed rates back down.

It’s also worth pointing out that not every lender is lifting their fixed rates.

A number of smaller lenders have trimmed their fixed rates, with some still offering rates below 6.0%.

That’s why it’s so important to get in touch so we can help you explore a wide range of lenders and loan products.

Your next step

Locking in your loan rate can bring certainty to your budget, and eliminate the stress of the rollercoaster rate ride.

If you’re not sure whether to go variable or fixed – or a combination of both – get in touch to see how the numbers stack up for your situation.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.