First home buyer numbers have halved: is it time to swoop in?

Repeated cash rate hikes have put many first home buyer plans on hold. So could you swoop in and reap the benefits with less competition in the market?

In case you missed it, from May to December the RBA lifted the cash rate from 0.10% to 3.10%.

This has no doubt hit many mortgage holders hard, but it’s also pumped the brakes on the number of first home buyers looking to enter the property market.

In fact, current Australian Bureau of Statistics data shows that the number of first-home buyers fell 3.2% to 8,576 in October alone.

That’s almost half the 16,187 first home buyers who entered the market during the January 2021 peak.

So, if you’re looking to buy, how can this benefit you?

Let’s take a look.

Less competition and more bargaining power

From mid-2020 to the end of 2021 we saw a house buying frenzy. And house hunters who were unable to compete had to make do with the leftovers.

But fewer buyers on the market means there’s less of a chance you’ll have to duke it out for your chosen property.

There could also be more favourable homes for you to choose from, without the overcrowded open houses.

And with fewer buyers making offers, sellers could have concerns about offloading their property.

November 2022 CoreLogic data shows the median days a property sits on the market is 35, compared to just 20 days in 2021.

So, if you’ve got your financial ducks in a row and are prepared to negotiate … flex that bargaining power and try for a great price.

Softening property prices

High demand in recent years saw property reach eye-watering prices. But over the past three months there’s been a decline around most parts of the country (barring regional South Australia and regional Western Australia).

In fact, national data has shown the biggest annual decline in home values since 2019, with a 3.2% drop over the past year.

In some instances, it could be cheaper to buy than rent. National median weekly rental prices rose by 4.3% in September this year – a record-breaking price hike.

And a recent analysis found that for 518 Australian suburbs, home loan payments were more affordable than renting.

Escaping the rent crunch and buying your first home in an opportune area could be a smooth move if your finances are in decent shape.

And you might want to get the ball rolling sooner rather than later.

That’s because prices could go up again as early as next year if the RBA pauses rate rises and inflation drops, according to SQM Research’s Housing Boom and Bust Report for 2023.

Government schemes for savings

Taking advantage of government incentives puts the keys in first home buyers’ hands 4 to 4.5 years quicker, on average.

Giving lenders mortgage insurance the big swerve, paired with a low deposit of 5%, is an enticing deal.

And if you’re eligible, that’s what the government’s First Home Guarantee can offer.

Spots are limited though and have historically been snapped up quickly.

But with fewer first home buyers entering the market, you may have more of a chance of nabbing a spot in the scheme.

Find out more

So, if you’re ready to make the big leap toward home ownership, give us a call.

We’ve got the know-how to help you work out your borrowing capacity and your mortgage options.

We’ll take the confusion out of financing your new home, so you can get on with swooping in on the house of your dreams.

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.

Are we there yet? RBA hikes cash rate for eighth straight month to 3.10%

The Reserve Bank of Australia (RBA) has driven the cash rate up by another 25 basis points to 3.10%. Find out how much this final cash rate hike of the year has increased your mortgage repayments in 2022, and what you can expect in 2023.

The good news? This is it. You can head into the summer holidays knowing this is the last rate rise until at least February when the RBA board will meet again (thankfully they take January off!).

The cash rate now sits at 3.10% following eight months of consecutive rate hikes.

RBA Governor Philip Lowe said in a statement the RBA board expects to increase interest rates further over the period ahead, but it is not on a pre-set course.

“Inflation in Australia is too high, at 6.9% over the year to October,” said Governor Lowe.

“There has been a substantial cumulative increase in interest rates since May. This has been necessary to ensure that the current period of high inflation is only temporary.

“High inflation damages our economy and makes life more difficult for people.”

So how much have your mortgage repayments gone up in 2022?

Unless you’re on a fixed-rate mortgage, the banks will likely follow the RBA’s lead and increase the interest rate on your variable home loan soon.

Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.

This month’s 25 basis point increase means your monthly repayments could increase by almost $75 a month. That’s an extra $835 a month on your mortgage compared to May 1.

If you have a $750,000 loan, repayments will likely increase by about $110 a month, up $1250 from May 1.

Meanwhile, a $1 million loan will increase almost $150 a month, up about $1,680 from May 1.

How high are interest rates expected to go in 2023?

Here’s what economists from the big four banks are predicting in 2023:

CommBank – no increases in 2023. Dropping to 2.60% by December 2023.
NAB – rising to 3.60% by May 2023 and then staying steady.
Westpac – rising to 3.85% by May 2023, then dropping to 2.85% by November 2024.
ANZ – rising to 3.85% by May 2023, then dropping to 3.50% by November 2024.

Worried about your mortgage? Get in touch

If you’re starting to feel the pinch and are worried about what interest rate rises might mean for your budget in 2023, feel free to contact us today.

Some options we can help you explore include refinancing (which could include increasing the length of your loan to decrease monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.

So don’t spend the holiday season sweating on next year’s mortgage repayments – get in touch now so we can work out a plan together.

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.

Where there’s a will (and genuine savings), there's a way

Inheritances can be a bittersweet part of life. But an inheritance alone won’t always cut it when applying for a home loan. Having genuine savings can help show lenders you’ve got what it takes to meet mortgage repayments.

With many older Australians having accumulated a decent amount of wealth throughout their years, it’s not uncommon for some of their younger family members to receive a leg-up into the property market when they pass away.

But an inheritance alone won’t always cut it to land a home loan.

In addition, you may be expected to show proof of genuine savings. This says “hey, I can put money aside to meet repayments” – which is music to a lender’s ears.

So today we’ll break down what may or may not be considered genuine savings, and how you could use your inheritance towards a home loan.

What counts as genuine savings?

Genuine savings are funds that show off your saving prowess.

Lenders typically look for genuine savings that amount to 5% of the property purchase price. They also like to see that these savings have been held or accumulated for a minimum of three months.

Here are some examples of commonly accepted genuine savings:

– Regular deposits into a savings account over a three month period.
– Term deposits held for at least three months.
– Shares or managed funds held for at least three months.
– A deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid.

Some lenders may also accept your rental payment history as genuine savings.

And some may accept equity in existing property, bonuses, cash gifts, and even your inheritance as long as it has been held in your account for at least three months.

But then again … some may not.

Genuine savings policies often differ between lenders. So it’s important to know just what will be accepted by your lender of choice – and we can help with that.

What doesn’t count as genuine savings?

So now we know what may be accepted. Here are examples of funds that lenders commonly don’t consider:

– Gift from parents or family.
– First Home Owner’s Grant (FHOG).
– Borrowed funds (for example money taken from a personal loan).
– Money from selling assets (for example selling a car or furniture to raise cash).
– Tax refunds.
– And today’s topic … inheritance.

But ultimately, it depends on the policy of the lender you’re applying with, because some of these examples (such as your inheritance) may be accepted under certain circumstances.

How can I use my inheritance to buy a home?

Some lenders will allow you to use your inheritance towards genuine savings … but with caveats.

They’ll need proof that the money is in fact yours.

Your lender may ask you for a letter of validation from the executor of the will. They may want to see a copy of the will and grant probate (which proves it’s legally binding).

They’ll also want proof the amount has been deposited into your bank account. Or, they’ll want proof from the executor (or a solicitor) showing you have legal access to the money.

And finally, some lenders require you to hold the funds in your bank account for a minimum of three months before they’ll count your inheritance as genuine savings.

It’s important to get clear on the requirements of your lender of choice.

This brings us to our next point …

Give us a call

If you’re looking to use your inheritance for a home loan, give us a call.

With different home loan policies for different lenders, it can be confusing.

We can help you work out who accepts what for genuine savings. And show you which lenders are willing to work with your inheritance, so you can make the most of 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.

Your new phone or your home loan? What would you research more?

What’s more important: your new phone or your next home loan? Well, we were stunned to see a recent survey that showed Australians put more effort into researching phone plans than they did their home loan. Here’s how we can help you get the balance right.

More than 70% of Australians say they’re more likely to spend time looking at options for phone and internet plans, car insurance and even electronics purchases, than researching a home loan – according to a recent Pepper Money survey.

And look, we get it.

Selfies, Netflix, Uber Eats, Instagram, Tinder … phones are pretty damn nifty.

Home loans? Admittedly, not so much.

But that’s no excuse to cut corners when it comes to making what could be the biggest financial decision of your life.

By allowing yourself to get so daunted that you just go with the bank you’ve had a savings account with for years, you could potentially lock yourself into a lemon of a loan.

So today we’ll explore why 7-in-10 Australians now use a broker to help them choose the right home loan for them – and why 86% say they’d use a broker again.

1. Save time and money

Applying for a home loan can be a full-time job in itself. The research, piles of paperwork, back-and-forth queries and requests …

With busy modern lives, finding the time can be tough.

A broker can save you time by doing the legwork and comparisons for you. We use our industry knowledge and connections to find suitable home loans with competitive rates.

We’re also aware of the type of additional fees and costs that some loans may have. And this could potentially save you money.

2. Target suitable lenders

A broker can assess your situation and point you in the direction of lenders who may be more likely to say yes.

For example, say you’re working as a casual or are self-employed. There are some banks out there who don’t really favour these kinds of employment arrangements.

However, mortgage brokers have access to a wider range of options and can put forward several potential lenders who are more likely to consider your application.

This targeted approach is important because submitting too many applications can hurt your chances of loan approval.

Each time you apply for a loan, your credit history is pinged. And too many hits on your credit score can lead to lenders seeing you as risky, potentially reducing your options. A broker will take this into account.

3. Expert guidance

What’s my borrowing power? How do I fill out an expense report? What documents do I need?

The application process can be a lot, especially when you’re busy. And the financial wizardry and jargon involved can be downright confusing.

But a broker can provide you with expert guidance.

We’ll look after the application process for you and help you organise your finances and prepare the documentation you’ll need.

You’ll also (hopefully) only have to supply that documentation once, rather than over and over again with different lenders.

Get in touch

So if you’re ready to find a mortgage and streamline the process, it’s time to put that all-important phone to use and give us a call.

We can help you get your ducks in a row and use our expert knowledge and experience to line up with the right kind of loan for you.

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.

5 surprising reasons for home loan heartbreak

Whether it’s your love life or your home loan application, no one likes getting rejected. There are many reasons why it could happen, and some can come as a big shock. So today we’ve outlined five surprising reasons to help you avoid home loan heartbreak.

There are few words would-be home buyers dread more than: “your home loan application has been rejected”.

It can feel like a real kick in the guts. And some of the reasons can be surprising.

A rejected loan application can hold up your home-buying plans and could have a negative effect on your credit score. So it can be important to avoid this scenario.

Below we’ve outlined five reasons your next application could be rejected – so you can start heading them off now.

1. Spending too much or too little

Most people know that spending too much is a major red flag for lenders. So limiting your unnecessary expenses is important.

But drastically slashing costs and living a very meagre existence can also be a concern.

Lenders can see this as unrealistic and unsustainable, and they can remedy it during assessment by applying the household expenditure measure (HEM) instead.

HEM is a standardised benchmark used to estimate annual living expenses. And if your standard, reasonable budget is on the super savvy frugal side, there’s a chance HEM may be higher.

2. Credit cards

Having multiple credit cards and performing several balance transfers can affect your application.

Every time you apply for credit an inquiry is logged on your credit history. And lenders will likely take notice.

Even your “just in case” credit card can have an impact. You may need to prove you have the means to pay off the limit within three years, even if the balance is $0.

3. By now pay later services

‘Tis the season for shopping. And buy now pay later (BNPL) schemes will be rolling out the red carpet.

But it might be worth resisting the temptation.

The Australian Prudential Regulation Authority (APRA) amended its framework this year to include BNPL debts in the reporting of debt-to-income (DTI) ratios.

Lenders will likely include BNPL debt in your DTI ratio to see your total debt in relation to your income. And a high DTI can result in limited borrowing capacity or even rejection.

4. Credit history

Your credit history is a finicky thing.

Even a few late payments can cause your credit score to drop. So it’s important to make sure your bills are paid on time.

Also, applying for too many credit cards or other loans can impact your credit score, and therefore your home loan application.

And with increasing news of scams, data breaches, and identity theft … it’s a good idea to check your credit history health.

You can request a free credit report once a year from one of three national credit reporting bodies which are listed on this government website.

5. Your type of income

Your type of income could make or break your application.

Lenders typically favour traditionally employed applicants with a steady and reliable income.

Many lenders consider self-employment carries a greater risk for less consistent income, and some can reject applications on these grounds.

So if you’re self-employed, when applying for a home loan it’s important to target lenders who are more open to lending to small business owners (we can give you the down-low on this).

Also, word on the street is that tax debt is increasingly becoming an issue for self-employed applicants. So if you have a large tax debt, it might be worth getting on top of that if you can.

Get in touch

If you’re not the kind of person who likes being rejected, well, the good news is that we’re not the rejecting type.

We’d love to have a chat about your home-buying dreams to see if we can match you with the right loan and lender for you.

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.