What a month! In the space of just a few days, we’ve seen big bank rate hikes, no change to the official cash rate, and property prices fall in key markets. Let’s break it down to see what it all means for spring 2018.
The big news
Late in August, Westpac threw a cat amongst the pigeons by raising its variable home loan rate despite the Reserve Bank of Australia (RBA) keeping the official cash rate on hold.
It was a move that put home loans firmly in the spotlight. And it’s important to understand what’s happening here because it could impact your home loan repayments.
By way of background, long before Westpac’s rate hike, a number of smaller lenders had already lifted their home loan rates citing higher funding costs.
The reason Westpac’s decision drew so much attention is that 75% of Australian borrowers have their home loan with one of the big four banks. And predictably it opened the floodgates for the other big banks to follow Westpac’s lead, with ANZ and the Commonwealth Bank both hiking their variable rates within a matter of days.
So what does the RBA think?
This is where things get really interesting.
The RBA Board has noted that the next rate move will likely be up. However, it has also said that we probably won’t see the cash rate rise until inflation and unemployment are both at levels the RBA is comfortable with – and that’s expected to take some time.
Bottom line is, regardless of the RBA’s cash rate, none of us are immune to higher home loan rates.
Lenders are still competing for high quality borrowers
In today’s competitive market, lenders are still fighting for quality business, and many are even reserving their best deals for new customers.
However, in the current environment of out-of-cycle rate hikes, it pays to cast your net wide – some of the smaller lenders are offering very competitive deals. That’s why it’s so important to get in touch with your Aussie Broker to be sure you still have a highly competitive home loan.
Property markets primed for spring
Meanwhile, spring is certainly shaping up as a buyer’s market in a number of our state capitals.
Over the last quarter we’ve seen property prices fall in Sydney (-1.2%), Melbourne (-2%), Perth (-1.9%) and Darwin (-0.7%). The other state capitals have all seen little, if any, upward movement, and even Hobart, which was going great guns at one stage, has seen home price growth come off the boil with gains of just 0.1% over the past quarter.
Bear in mind though, the short term market dips we’re seeing at present aren’t indicative of the longer term picture.
Our recent Aussie/CoreLogic 25 years of Housing Trends Report shows that the typical home owner pocketed average dollar growth in their investment of $18,400 a year over the last 25 years.
The same report found that house values nationally have risen 412% since 1993 – or about 6.8% annually. Based on that same rate of growth over the next 25 years, Sydney’s median house value could reach $6.3 million and Melbourne’s could hit $5.8 million. In fact, the median house price nationally could soar to $2.9 million by 2043.
The bottom line is that if you’re in the market for a first home, second home or even an investment property, you could enjoy greater buying power today than 12 months ago. Over time, the price you pay right now may pale in comparison to your home’s value further down the track.
Don’t wait. Speak with your Aussie Broker today for expert advice on the home loan that’s right for you.
You may also be interested in Is now a good time to go with a fixed interest rate?, Where will house prices be 25 years from now? and 4 things we’ve learnt about the Australian property market in 25 years