RBA hikes the cash rate for the ninth time in a row, to 3.35%

The Reserve Bank of Australia (RBA) has kicked off 2023 by increasing the cash rate a further 25 basis points to 3.35%. How much will this rate hike increase your mortgage repayments in 2023, and how high is the cash rate expected to go?

This is the ninth rate hike by the RBA in as many meetings (since May 2022), and it takes the cash rate to its highest level since September 2012.

RBA Governor Philip Lowe said in a statement that the RBA board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.

“In assessing how much further interest rates need to increase, the 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,” said Governor Lowe.

How much are your mortgage repayments expected to increase in 2023?

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 $910 a month on your mortgage compared to May 1.

If you have a $750,000 loan, repayments will likely increase by about $115 a month, up $1365 from May 1.

Meanwhile, a $1 million loan will increase by about $150 a month, up about $1,830 from May 1.

How high are interest rates expected to go in 2023?

Here’s what economists from the big four banks are currently predicting for the rest of 2023, and what also could be possible:

CommBank – no more increases for 2023 (prediction made prior to statement by Governor Lowe).
NAB – rates rising to 3.60% by May 2023. However, there’s a risk of a peak towards 4%.
Westpac – rising to 3.85% by May 2023. First rate cut should arrive by March 2024.
ANZ – rising to 3.85% by May 2023, but possibly 4.10% if inflation keeps rising.

Worried about your mortgage? Get in touch

Let’s not beat around the bush here: there are a lot of households around the country really feeling the pinch of all these rate rises.

Similarly, there are a lot of people on fixed-rate home loans wondering just what options will be available to them once their fixed-rate period ends and they have to transition over to a variable rate home loan.

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

So if you’re concerned about how you might meet your repayments in 2023, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you over the period ahead.

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.

Considering refinancing your mortgage? Here are some questions to ask

Home loan not up to scratch? Looking for a better rate? Or do you want to unlock equity? Then refinancing could be for you. But there are some important questions to ask first.

If you’re considering refinancing your mortgage, you’re not alone.

With the rising cost of living and interest rates hitting the hip pockets of many Australians, it’s a popular move.

According to ABS data, November 2022 saw refinancing values reach a record high of $13.4 billion.

Refinancing may offer you opportunities to unlock equity, land a better rate and avoid what’s known as “loyalty tax”. Sticking to the same loan could see you missing out on favourable rates and features lenders like to use to woo new customers.

Or maybe you’re about to come off a fixed loan period and are bracing for a potential rate hike.

Whatever your reasons for refinancing, we’ve got some questions to help you through the process.

What’s your financial picture?

Banks want to take a squiz at your financial profile before lending you a chunk of change. So check that your credit score is healthy to avoid disappointment.

Look at your budget to see how much you can afford to pay toward your mortgage.

Include interest, repayments, and service fees. And factor in possible additional refinancing costs such as application and valuation fees.

You can also consider how the length of your loan impacts your budget. A longer-term loan usually comes with lower repayments but more interest over the lifetime of your loan.

A shorter-term loan on the other hand would usually mean you make higher repayments now, but you could save on total interest payments.

Whichever way you’re leaning, we can help you crunch the numbers.

Do you have equity?

Having 20% equity in your home is typically a lender requirement when refinancing.

But what is equity?

It’s the difference between the market value of your property and the balance of your mortgage. And with the recent decline in property values, it’s an important thing to check.

The 20% equity typically acts as a deposit. Not having 20% may mean you have to pay lenders’ mortgage insurance, which may make refinancing not worth your while.

And negative equity – when your mortgage balance exceeds your property’s value – would most likely put the brakes on refinancing plans.

But if you have additional equity you may be able to unlock it when refinancing.

Let’s look at an example – say your house is now worth $1 million. But you bought it for $800,000 a few years back with a $600,000 loan that you’ve paid down to $500,000.

Banks typically allow a loan for 80% of a property’s market value (depending on your financial position and other factors). So if you refinanced your $500,000 loan to an $800,000 loan, that could unlock $300,000 for things like reno projects or investments.

What are you looking for?

Now it’s time to think about what you want from a loan.

A better interest rate is usually top of the list. But what other features could benefit you?

An offset account may be something you want to reduce interest. Or the ability to make additional repayments without incurring penalties.

Depending on what you’re after, you may not need to move to another lender. We can always talk to your current lender first to see if they will come to the party.

If not, we can then explore your options further afield.

Get in touch

Want to refinance to unlock a better interest rate, features and benefits, or equity in your home? Give us a call.

We can help assess your situation to see what’s possible. And locate loans and lenders that are a great fit 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.

Can a job switch affect your mortgage application?

Changing jobs may offer more perks – higher income, greater fulfilment, and the opportunity for growth are often things people look for in a new gig. But could it also impact your mortgage application?

January and February each year is typically prime time for people considering switching jobs – the Christmas holiday period is in the rearview mirror and a new year of possibilities lies ahead.

In fact new LinkedIn research shows 59% of workers are thinking about leaving their job in 2023, with more than half saying they’re confident of finding something better.

Coincidentally, 2023 could also be a good time to start considering your next property purchase, with house prices reaching a record decline of -8.40% in January from the May 2022 peak.

So could a job change impact your mortgage application? The short answer is it could.

But how much of an impact it has depends on a few factors.

Can you still land a mortgage?

Employment histories with frequent job changes over short timeframes can raise lenders’ eyebrows.

But even with a rock-solid employment profile, lenders may view a fresh job change as an added risk.

Lenders love to see stability. Staying in a job and building up your employment and financial profile will improve your mortgage approval chances.

A new job is less stable than one you’ve been in for a long time. There could be probation periods for both you and your employer to see if the role fits.

But you still may be able to land a mortgage with a new job.

Some job changes are low risk, with possibly minor effects on your mortgage application.

And some are high-risk and may result in delays and more hoops to jump through.

Low-impact changes

A change lenders consider less risky is switching to a permanent, salaried role in your current industry.

This is because you have a proven record of holding employment in this field and have the promise of a steady paycheck streaming into your bank account.

Typically, lenders want to see at least two to three of your most recent payslips. Some may require you to have your new job for at least three months.

So as long as you have a good financial profile, meet the requirements, and don’t have an unstable employment history, you may experience minimal impact.

But ultimately this depends on the lender and the loan.

High-impact changes

Considering a complete career overhaul, starting a business, or switching to casual, contract, or freelance work?

These are exciting changes that may result in more fulfilment, flexibility and money, if the stars align.

But while opportunity is on the cards, so too is risk – as far as lenders are concerned.

This is because sometimes to enter a new industry you have to accept lower-paying roles. Or because it can take some time to thrive in a new industry or business.

Similarly, casual work (and similar) often has higher pay rates. But part of this is to offset the lack of benefits you may receive, such as job security, severance pay and sick leave.

Suffice to say, all these types of job changes may make the mortgage application process more difficult.

However, there could be lenders who will consider your application if your financial profile is otherwise hunky dory and your previous employment history is stable.

Lenders may want to see more than the typical two to three payslips. Some may also require you to be employed in your new role for at least three to six months.

And self-employed applicants typically need to show at least a year’s worth of business income records.

These added requirements may result in a need to delay applying for a mortgage for a little while.

Find out more

Switching up your employment and landing a mortgage can be tricky. But having a helping hand can make the process easier.

We can point you in the direction of lenders more likely to consider your situation and help put together an application that presents your situation in the best possible light.

So if both a career change and a new property are on the cards for you in 2023, give us a call today.

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.

Planning a reno in 2023? Here are 4 tips for smooth sailing

Having a spruced-up home feels great. And it can also boost your home’s value. But, as exciting as the prospect of rolling up your sleeves and getting on with a reno can be, there are certainly pitfalls to avoid.

New year, new you, new reno?

Renovating is exciting. Having aesthetics and function on point can make your home feel new again. And possibly add to its value should you want to sell or refinance.

But we’ve all heard reno horror stories: shonky tradies, budget blowouts and permit nightmares, not to mention the recent supply chain disruptions.

So we’ve compiled some tips to help you avoid these perils (and associated headaches!).

1. Prepare and plan

As Benjamin Franklin said, “if you fail to plan you’re planning to fail”. Bit harsh, but it rings true. Especially for a reno.

It’s a good idea to keep organised with a to-do list and a timeline.

You’ll need to check for council restrictions and permit requirements. Ignoring this could mean hefty fines. Or having to tear down your hard work (it does happen!).

Contracts should be set in place with tradies, the correct materials purchased, and a budget set … you’ll have a lot on your plate.

2. Research tradies

It’s a no-brainer that a reputable and skilled tradie will most likely provide better outcomes. But they usually come with a higher price tag.

The temptation to hire that cheap as chips mate of a mate is real.

But it’s important to hire licenced tradies. Most state fair trading websites offer a free online service for you to check.

Not doing so runs the risk of fines, shoddy work and costly re-dos. And the work of an unlicenced tradie most likely won’t be covered by insurance.

Also, be sure to check out any reviews and examples of their work.

3. Budget and a buffer

Having a budget is an important step. You need to be realistic about how much your project is going to cost and whether you can afford it.

It’s also wise to have a contingency.

Unexpected costs can really add up – just ask anyone who has completed a reno. Being prepared with a buffer can give you peace of mind to forge ahead in the face of surprises.

Also, having a broker like us on your side can help make funding your reno more straightforward.

We’ll help you explore your financing options, which might include unlocking the equity in your home to fund your reno or any added costs.

Not only can we help you find a competitive rate. We can also track down flexible loans, such as a line of credit, to help cover any unforeseen costs that crop up.

4. Be flexible

To get a reno done, it’s best to be flexible.

It’s not unheard of to uncover issues during a reno – such as structural problems, water damage, asbestos and faulty wiring – which require you to deviate from your original plans and budget.

The building industry is also facing supply chain disruption due to recent world events, including the COVID-19 pandemic and the war in Ukraine.

As a result, wait times and costs are blowing out for some materials and so a specific item you had your heart set on may need to be replaced with an alternative.

But by being flexible – including having a flexible line of credit – you can adapt and move forward with your reno.

Get in touch

We know a thing or two about financing a reno.

Our team can find flexible loan options, lines of credit and competitive rates to suit you. And if you’ve got equity in your home, we can help you unlock it.

So if you’d like to find out more, get in touch today. We’re ready to help make your 2023 reno dreams a reality.

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.

Get a financial head start on the school year

Finding the time to delve into your finances can be a struggle. But the school holidays can offer the perfect time, especially for teachers. Get cracking on your financial to-do list these holidays by looking into refinancing your mortgage.

Planning on giving your finances a boost by refinancing your mortgage?

Well, you’re not alone. Following a string of rate rises last year, borrowers are refinancing in record numbers, according to PEXA research.

And ABS finance and wealth spokesperson, Katherine Keenan, says recent data shows owner-occupier refinancing with different lenders remained at record levels in 2022, above $12 billion.

For many, mortgage repayments take the biggest chunk of the household budget which has become increasingly stretched by the rising cost of living.

So, the school holidays could provide some spare time to give your mortgage a thorough look over.

We’ll fill you in on why it may be a good idea to refinance your mortgage, what to look out for, and how you can get a helping hand.

Why refinance?

If it’s been a while since you’ve revisited your mortgage, you could be paying a higher interest rate than you need to. This is commonly known as the loyalty tax.

Lenders like to offer all the bells, whistles, and better rates to new customers in a bid to get their business.

Since they’ve already won you over, you often don’t get invited to the party.

But by refinancing, you could have lenders offering sweet new customer deals to woo you.

And if your fixed-rate mortgage good times are about to stop rolling, you too could get in on the new customer woo-fest and shop around for a better interest rate.

With the right offer, it can really pay off – refinancers saved on average $1,524 per year, according to 2022 PEXA data.

Over three years, that adds up to an extra $4,572 in your pocket for renovations, savings, extra repayments, or whatever you like.

And you don’t always need to move to another lender to see savings. You could refinance or negotiate with your existing lender, depending on their policy.

They may be open to offering you a deal to keep you on as a customer.

Ditch the hassle

If you’d like to find out more about refinancing, get in touch today.

We know all the ins and outs of refinancing and can shop around to find the most suitable loans for you.

So let us do the legwork on your refinancing goals these holidays so you can maximise your R&R.

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.