In the world of money, nothing stands still for long, but the last quarter has delivered a raft of potential game-changers that you need to know about.
So much has happened in the past three months: A Federal election, an official rate cut, shifts in the property market, and proposed changes to lending restrictions.
Let’s see what it means for you.
Morrison Government re-elected
The Morrison Government’s victory in the Federal election is big news for property investors.
The Labor party had proposed changes to both negative gearing and capital gains tax on investment properties. However, with the Morrison Government successful at the ballot box, would-be investors can rest assured that it’s business as usual in regard to tax breaks for investment properties.
Help for first home buyers
The run up to the election also saw the Morrison Government announce an exciting new plan to help first home buyers.
The First Home Loan Deposit Scheme, which kicks in on 1 January 2020, allows first home buyers to purchase a home with a deposit of just 5% while pocketing savings of up to $10,000 in lenders mortgage insurance. Not a bad deal!
You’ll need to earn less than $125,000 ($200,000 for a couple) to be eligible and restrictions will apply on the value of the property at a regional level. Full details are pending, but any proposed scheme that helps first home buyers is good news.
Reserve Bank cuts cash rate
Early June saw the Reserve Bank of Australia (RBA) cut the official cash rate by 0.25%, driving the cash rate down to a new historic low of 1.25%.
While the rate cut was designed to help Australia achieve sustainable economic growth, it certainly set the cat amongst the pigeons in the home loan market.
A number of lenders, including our own Aussie Home Loans, have been quick to pass on the full 0.25% rate cut to customers with variable home loans.
However, others have been less willing to share the savings. One of the big banks has cut its variable home loan rate by just 0.18%.
The key message is that now is the time to contact your Aussie Broker to see if your home loan is still right for your needs and importantly, competitively priced in today’s market. When the Governor of the RBA and Federal Treasurer say banks should pass on the full 0.25% rate cut, it’s time to be sure your lender is providing a fair deal.
Possible changes to home loan stress tests
More good news. Bank regulator APRA has suggested changes to the way banks assess home loan applications. At present, lenders are required to check that borrowers can afford their home loan based on an interest rate of 7%. That’s clearly way higher than current home loan rates, and APRA has suggested lowering the benchmark to a more realistic rate buffer of 2.25%.
If this proposal goes ahead, it could make refinancing easier, enable more first home buyers to enter the market, and give those who are in the market a chance to upgrade their home.
We’ll keep you posted on what’s happening, or contact your local Aussie Broker for the latest updates and review your borrowing position.
Meanwhile… in the property market
It looks as though the property market downturn is losing steam. Nationally, dwelling values were down 0.4% in May – the smallest month-on-month decline since May 2018.
Housing is now much more affordable in many areas, with values down 10% nationally since the market peak. That said, the RBA has noted that capital city prices remain 15% higher than five years ago so long term owners still have plenty to smile about.
The upshot is that Australians now have a golden opportunity to buy a new home or investment property at more affordable prices – and with a lower rate loan to boot.
Speak to your Aussie Broker today about achieving your property goals, whether that’s a lower rate on your home loan, buying your next home or even an investment property.