Easier to read and understand, our 2024-25 Federal Budget Summary wraps up the key changes and introductions that are likely to impact the property market.
Growth Expected
Economic growth is forecast at 2% next year and 2.25% in 2025-26
Inflation to Fall
The treasury expects inflation to fall to 2.75% by June 2025 (a more optimistic view than what the RBA has forecast).
Employment to Slow
Employment growth is forecast to slow from 2.25% this year to 0.75% in 2024-25, with unemployment rising to 4.5%.
Increased Borrowing Power
Boosts from Tax Cuts
Homebuyers will be able to borrow tens of thousands more next financial year due to tax cuts aimed at lowering the cost of living.
Higher Take-Home Pay
Adjustments to tax rates will increase most taxpayer’s take home, enhancing their ability to borrow for a home.
Auction Advantage
This increase in savings could make a significant difference during home purchases, potentially being the deciding factor in competitive bids.
Advantage for Dual Income Homes and First Home Buyers
Households with dual incomes will see a more substantial impact, potentially doubling the borrowing capacity increase.
Higher interest rates have constrained borrowing capacities for first-home buyers in the past, making the tax cuts particularly beneficial. Those buying affordable properties will benefit the most from the increased borrowing capacity.
Tax Cut Timing
Banks may take a month or so to update their calculators to reflect tax cuts, but brokers can manually adjust calculations sooner – allowing home buyers to take advantage of their additional take home pay sooner.
How will the 24-25 Federal Budget impact your property goals?
Wondering how this will impact your property goals? Whether you’re looking to buy, sell or invest, our team is here to help. Get in touch todayto see how we can help make your property goals a reality.
The decision to buy or sell property is always a tricky one, as it’s a significant financial step that involves careful consideration of various factors – including market conditions.
Whilst it’s important to know that real estate markets can be unpredictable, understanding the key indicators can help you to make an informed decision. So, let’s look at the factors influencing the Australian property market.
Low Listing Numbers = Increased Competition for Buyers
With decade-low listing numbers, there’s not a lot of competition in the market for vendors – but competition is fierce for buyers as they battle it out to secure a property. This is one of the reasons that selling conditions have strengthened, as evidenced by above average clearance rates, faster selling time and less negotiation.
The total number of homes listed for sale across Australia is currently 28% below usual (as reported by CoreLogic). When these volumes are low, selling conditions strengthen, meaning that potential vendors thinking about selling may jump in now rather than waiting until the traditional spring period where activity surges and there’s a spike in competition.
Rising Prices
Home values for Sydney, Melbourne, Brisbane and Perth all recorded an increase in housing values from the lows recorded in February. A mid-month update based on CoreLogic Australia’s daily Home Value Index showed the upswing gathering momentum, especially in cities such as Brisbane where the index is up 1.0% over the past four weeks whilst the Sydney property market still remains the strongest.. Considering housing affordability measures remain stretched such a strong rate of growth is surprising, with many experts predicting that this price rise will not be sustainable in the long term.
Low Supply vs High Demand
As mentioned above, decade-low listing numbers and high demand has lead to fierce competition between buyers – as seen in auction clearance rates that have been holding at 70% or higher in recent weeks.
In a time where the market traditionally tends to cool off, the stats suggest that, if anything, the market is gathering momentum instead of slowing down. Strong clearance rates as well as faster selling times and reduced discounting rates indicate that it’s definitely a vendor’s market.
Recent data from the National Housing Finance and Investment Corporation shows a 115,000 dwelling undersupply for 2028.
Interest Rates Continue to Rise
The biggest challenge for potential and current property owners? Interest rates. With interest rates continuing to rise, demonstrating an ability to service a loan remains one of the biggest challenges for prospective buyers to face.
Interest rates are high, but assessment levels are three percentage points higher again – making it even harder for buyers to enter the market or secure their dream property.
Economic Uncertainty
In addition to rising interest rates, we’re also in the midst of a cost of living crisis where consumer confidence is low.
Should RBA cut interest rates, there’s a good change we would see a pick-up in both buyer and seller activity. It’s also highly likely that lower interest rates would be the catalyst for a further uptick in housing values, however, we’re not expecting a rate cut anytime soon and there’s speculation that rates may continue to rise this year.
Economists are split on their forecasts with predictions for further rate hikes, stability and some cuts later this year – all contributing to uncertainty and low consumer confidence levels.
A Helping Hand
Government policies and regulations play a crucial role in shaping the property market. Policies related to taxation, lending practices, and housing affordability can have both direct and indirect effects on the market.
At the moment, first home buyers in particular have a wide variety of grants, concessions and schemes available to them (outlined in our First Home Buyer Update here) that could make purchasing a property easier and more affordable.
Migration Predicted to Recover
With net overseas migration set to fully recover to pre-pandemic levels there will be more pressure on the housing market than we’ve seen in recent years.
With the return of international students and the surge in migration, it is estimated that an extra half a million people will be looking for somewhere to live in Australia in the next two years.
Low vacancy rates bringing investors into the market
We are experiencing a rental crisis across the country, with historically low vacancy rates encouraging more investors into the market. Unfortunately for investors, rising interest rates and property prices have made this challenging – as well as rising building costs making it harder for investors and developers to buy and renovate or rebuild.
Is now the right time to buy or sell?
In short? Maybe. Unfortunately it’s not a one size fits all answer.
Ultimately, making an informed choice that aligns with your own circumstances and long term goals is key when navigating the property market.
Luckily, we’re here to help. We’ll sit down to work out what your goals are, what your property budget may be and how we can help you secure a property. Contact us today to get started!
In October 2019, the Treasurer direct the ACCC to conduct an enquiry into home loan pricing, wanting the commission to investigate two key concerns:
The prices charged for home loans since 1 January 2019
Impediments to borrowers switching to alternative lenders
Whilst the interim report, focusing on home loan prices, was released in April 2020, the final report has now been released which has found that many Australians with older home loans continue to pay significantly higher interest rates than those with newer loans.
This report also focuses on impediments to borrowers switching to alternative lenders and identifies recommendations to address these impediments. The ACCC also recommended that the Government action a further 5-year monitoring enquiry into pricing and competition in the home loan market.
So, let’s break down the recommendations outlined in the report and how you can action that advice yourself today.
All lenders should be required to provide an annual prompt to borrowers with older variable rates (loans three or more years old)
This recommendation is to encourage borrowers to engage in the home loan market so that they can potentially switch lenders or home loan products.
The problem, however, is that for a lender, complacency drives income. Often referred to as the “loyalty tax”, lenders often make a lot more money on customers who “set and forget” their loans – sticking with the original loan for years, if not, the full length of the loan.
Solving the problem now: Instead of waiting for the government to set requirements for lenders, you can act today.
At Sanford Finance, we do this for you, monitoring and reviewing every client’s loan annually, ensuring you always have the best loan product for your needs. In addition to this, we also encourage clients to get in contact should they feel their rate is too high or their circumstances have changed, and the loan product no longer suits their needs.
All lenders should provide borrowers with a standardised form to discharge the borrower’s home loan from their existing lender
The goal of this recommendation is to make it easier for borrowers to switch loans – providing a form which is easy to access, fill out and submit. They also recommended that a 10-day time limit be placed on lenders to complete the discharge process.
Currently the process to switch from one lender to another varies greatly depending on which lender you are currently with. For some lenders, the process is made simple whilst others make the task arduous and frustrating, often leading to borrowers sticking with their loan just to avoid the process.
Solving the problem now: If the thought of refinancing or switching lenders stresses you out (or feels like another thing on the to-do list that you just don’t have time for) we’re here to help. Whilst we can guarantee the discharge process will be done in 10 days, our team will do everything in our power to speed up the process.
With the Home Loan Inquiry identifying that, as at December 2019, almost half of all variable rate loans were at least four years old, most Australians should take the time to look at their loan and see if there is a better rate or loan product available.
As of September 2020, borrowers with home loans between three and five years old were, on average, paying around 58 basis points above the interest rate for new loans. Borrowers with home loans between five and ten years old were, on average, paying around 71 basis points above the average interest rate for new loans. Borrowers with loans older than ten years old were, on average, paying around 104 basis points above the average interest rate for new loans.
Many of these borrowers could save a significant amount of money by switching to a new home loan. For example, if a borrower with a home loan of $250,000 switched to a home loan with an interest rate 58 basis points lower than their existing loan, they would save over $1,400 in interest in the first year. Over the remaining life of their loan, that borrower would save over $17,000 in interest in net present value terms.
Where should you start?
Thinking that now is the right time to look at your loan and find a better deal?
Get in touch with our team today to start the ball rolling. We’ll work with you to look at your current loan, your present circumstances and will recommend alternate loans that are better suited to your needs.
With interest rates and the cost of living rising, many Australians are searching for ways they can save money each month – but there’s one way you may not have thought of.
Debt consolidation involves bringing your existing debts together into one new loan. The objective is to reduce the number of individual payments you make and reduce the interest rate you are paying on your more expensive debts.
Who should consider debt consolidation?
Debt consolidation may be something to consider if you are:
Paying a very high interest rate on your debts – for example a credit card, cash advance debts or store credit purchases.
Managing multiple debt repayments and struggling to keep track of what is due and when.
Getting into a credit trap where all of your spare income is used to pay interest, but you don’t have enough left over to reduce your debt balances.
What does debt consolidation look like?
There are several different strategies that can be used to consolidate debts, including:
Moving debts to a new credit facility (e.g. a personal loan or mortgage) with a lower rate of interest or lower fees.
Lengthening the time of existing loans (e.g. taking a mortgage debt back out to the 30-year loan term).
Changing the repayment terms on an existing loan to interest only.
A combination of these strategies can also be used, depending on your circumstances.
What are the benefits of debt consolidation?
Usually, debt consolidation is implemented to make it easier for you to pay your debts, however, there are numerous other benefits, including:
Potential cash savings – Potentially the biggest benefit of debt consolidation. By consolidating your debt into a loan charging a lower interest rate, you have the potential to save interest on monthly repayments and reduce your overall interest.
Lower repayments – Reducing the interest rate and spreading out repayments over time could potentially reduce the monthly repayment due.
Simplicity – One loan repayment is a lot easier to manage than juggling several repayments.
Savings on interest and fees – Debt consolidation could potentially reduce the amount of interest you pay on high-interest facilities such as credit cards and save you money on fees for multiple credit facilities. This may make it easier to pay back your debts.
Stress relief – Specialist lenders are available that may lend to you if you have missed repayments on your current debts, or if you have a poor credit history.
What is important to remember about debt consolidation?
It’s important to remember that a debt consolidation strategy doesn’t reduce your debt – it just makes your repayments more manageable.
A debt consolidation strategy should be implemented in combination with a change to your spending behaviour, so that you can work to reduce your overall debt level over time.
With interest rates at a record low and the threat of rates rising, there’s lots of talk about whether or not you should or shouldn’t lock in your interest rate.
As with every loan, there’s no hard or fast answer – but you may be interested to learn the pros and cons of fixed and variable rates to decide what is best for you.
What is a fixed rate?
A fixed rate loan is exactly that – a fixed rate. Once your rate is locked in, it stays that way for a certain period.
What are the benefits of a fixed rate home loan?
Rate rises won’t impact you If you expect interest rates to rise during your fixed rate period, you could save money on future repayments
Set and forget With a fixed rate you know exactly what your repayments will be for the loan period (usually 1-5 years)
Easier budgeting Because you know exactly what your repayment will be, budgeting and managing your cash flow is easier, giving you peace of mind.
What are the downsides of a fixed rate home loan?
The rate you apply for may not be what you get When approaching a lender for a fixed rate loan, remember that the rate you apply for may not be the rate you get when you settle on the loan. Some lenders will guarantee a certain fixed rate before settlement but a “rate lock fee” may apply.
Less flexibility Fixed rate loans limit your ability to pay off the loan faster by restricting additional repayments or capping them at a certain amount per year. Significant break fees may also apply if you want to refinance, sell your property or pay off your loan in full before the fixed term has ended.
Fewer features Many of the desirable features that come with a variable rate home loan aren’t available for fixed rate loan holders. Typically borrowers will not be able to redraw funds over the fixed period or link an offset account to their loan.
Rate cuts won’t impact you You won’t be impacted by rate rises, but you also won’t benefit from any cuts the lender makes to their home loan rates over the fixed term.
What is a variable rate home loan?
The most common home loan option, variable rate loans allow the lender to change their rates at any time – meaning your repayments may increase or decrease depending on what is happening.
What are the benefits of a variable rate home loan?
Repayment flexibility Variable rate loans allow for a wider range of repayment options, including the ability to pay off your loan faster without incurring interest rate break costs. Some variable rate loans also offer features like offset accounts or redraw facilities that work to reduce the loan balance you pay interest on, whilst still allowing you to access surplus funds
Easier to refinance If you find a better deal elsewhere, it’s easier to switch to a different lender or home loan product as you are unlikely to attract break costs.
If rates fall, you pay less Lenders will cut rates for a variety of reasons, mainly in response to reduced funding costs. If you’re on a variable rate, you’ll reap the benefits of lower repayments.
What are the downsides of a variable rate home loan?
If rates rise, you pay more Just as you pay less if rates fall, you’ll pay more when the rates rise. Lenders can change a variable interest rate at any time, meaning the rate will likely fluctuate over the life of your loan. If your bank raises rates, your repayments will also rise.
Less cash flow predictability With your repayments able to increase or decrease at any time, it’s harder to budget and predict your cash flow over the long run.
What is a split rate home loan?
Another option is to opt for a split rate loan. This allows you to hedge your bets on interest rates by splitting your home loan rate.
Many lenders offer the option to divide your home loan into multiple accounts, allowing you to take advantage of both fixed and variable rates.
What are the benefits of a split rate home loan?
Peace of mind Allocating a percentage of your loan to a fixed rate may give you more peace of mind that when the variable rates fluctuate you can still afford your monthly repayments.
More flexibility By keeping a proportion of your loan on a variable rate, you have the flexibility to benefit from offset or redraw capabilities on that portion of your loan. You can also take advantage of falling rates when they happen.
What is the best option for me?
A home loan is a long-term commitment – so it’s important to choose the right one for your needs. As your personal circumstances are likely to change throughout the life of your loan, it’s important to revisit the rate you pay at various points to ensure you’re getting a good deal and using your loan features or rate splits effectively.
Not sure what is right for you? That’s why we’re here. Our team will talk you through the different options and find the loan that best suits your unique needs.