After years of rising interest rates that have tested Australian households and businesses, the Reserve Bank of Australia (RBA) has finally delivered some welcome relief. In its May meeting, the RBA cut the official cash rate by 25 basis points to 3.85% – the first reduction in over two years.
This significant shift in monetary policy marks a turning point for borrowers across the country. But what does it mean for your finances, especially if you’re self-employed or running a small business? Let’s break it down.
Why Now? The Economic Picture
The RBA’s decision reflects growing confidence that inflation is finally under control. Recent data shows that core inflation has returned to the RBA’s target range of 2-3%, sitting at 2.9%. This crucial development has allowed the central bank to shift focus from fighting inflation to supporting economic growth.
Despite global uncertainties – including recent U.S. credit rating downgrades and ongoing trade tensions – Australia’s economy remains resilient:
Unemployment is steady at 4.1%
The labour market participation rate is strong at 67.1%
Economic growth has slowed but remains positive
What This Means for Homeowners
If you’re currently paying off a mortgage, this rate cut could deliver meaningful savings:
On a $500,000 loan, you could save approximately $76 per month (assuming lenders pass on the full cut)
On a $1 million loan, potential monthly savings increase to about $152
For those who have been struggling with higher repayments over the past two years, this represents the first real relief in a challenging period. While one rate cut won’t completely offset previous increases, it signals a potential change in direction that could lead to further cuts later this year.
Self-Employed Australians: Your Opportunity Window
If you’re self-employed or running a small business, this rate cut opens several strategic opportunities:
1. Business Expansion
Lower interest rates make business loans more affordable, potentially enabling expansion plans that may have been on hold during the higher rate environment.
2. Equipment and Vehicle Finance
If you’ve been delaying purchases of new equipment, vehicles, or other business assets, now could be an ideal time to reassess. With improved borrowing conditions, asset finance options become more attractive.
3. Refinancing Existing Debt
Many self-employed Australians have been carrying higher-interest debt through the rate hiking cycle. The new environment creates favourable conditions for consolidating or refinancing this debt.
Looking Ahead: Will Rates Fall Further?
While the RBA has made its first move, economists remain divided on the pace of future cuts. Our analysis suggests:
The next rate cut could come as soon as August, depending on inflation data
A more conservative scenario would see another cut in November
By mid-2026, we could see the cash rate settling between 3.0-3.5%
The RBA has made it clear that future decisions will depend on economic data, particularly inflation figures and employment statistics.
How Sanford Finance Can Help
As specialists in lending solutions for self-employed Australians and small business owners, we’re uniquely positioned to help you navigate this changing interest rate environment:
Home Loan Review: Let us assess your current mortgage and identify potential savings through refinancing
Business Lending Solutions: Access our network of over 40 lenders who understand the unique needs of self-employed professionals
Asset Finance: Explore competitive rates on equipment, vehicle, and other asset purchases
Strategic Planning: Develop a financing strategy that takes advantage of the current rate environment
Take Action Now
The rate cut environment won’t last forever, and taking action now could secure you significant savings over the life of your loans.
Contact our team today for a no-obligation review of your financial position. We’ll provide clear, straightforward advice on how to make the most of this shifting rate environment.
Sanford Finance – Smart Lending for Self-Starters
Disclaimer: This information is general in nature and does not take into account your personal financial situation. It is provided for educational purposes and should not be considered financial advice. Please consult with a financial professional before making any financial decisions.
Property Share is a simple home loan option that allows multiple people to buy a property together and share the costs, while keeping their finances separate. It’s great for homebuyers and investors looking to refinance or enter the property market sooner.
Let’s break down what Property Share is, the benefits and risks and what you need to consider before applying for this type of loan.
Who is Eligible for a Property Share Loan?
Available to Individuals, non-trading Companies and/or Family/Unit/Hybrid Trusts.
Eligible Loan Types
What you can use this loan for
What you can’t use this loan for
– Standard Variable Rate home loan – Fixed Rate home loan – Refinance
– Owner occupied or investment property purchase – Home renovations – Consolidation of personal debt – Off the plan purchases – Personal needs – Personal investments
– Business purposes – Bridging loans – Purchase of land – Building and construction loans
To qualify for a property share loan, all borrowers must
Be owners of the property (no third-party guarantors allowed).
Guarantee each other’s home loans as security support only.
Show they can handle the minimum required repayments for their own home loans.
Get independent legal advice before entering into a Property Share arrangement.
Sign a Statutory Declaration.
A maximum of two home loan applications per security is allowed. However each application may have multiple borrowers or multiple loan products (such as a split loan).
The Benefits of Property Share Loans
Divide property costs as desired; each borrower manages loans and repayments independently.
Customise home loans to individual needs: choose amount, type, term, and repayment structure.
Benefits include entering the property market with a smaller deposit and building equity faster.
Allows investment with multiple parties while keeping finances separate.
The Risks of Property Share Loans
In a Property Share arrangement, you guarantee repayment of the other borrower’s home loan if they can’t pay.
If they default, the lender will try to recover the debt from them first.
As a last resort, the lender may assist in selling the property that secures your loan to repay the debt.
Important Note: Agreeing to be a guarantor and providing a guarantee comes with substantial financial risk. This could mean losing your property (even your family home) or facing significant financial loss. If there’s a default and you must repay the guarantee, it could also hurt your credit score.
Did you know? Each borrower can choose a home loan product that suits their needs. The features, benefits and interest rates of the selected home loan(s) will apply. We will guide you through the different options available and find the best fit for your unique situation.
Ready to Explore Your Options and Find Your Dream Home?
Contact us today via our website or on 02 9095 6888 and talk to one of our specialist mortgage brokers who can help you navigate the process of Property Share Loans and find the best approach for your unique situation.
From July 1st 2024, 50,000 new spots are now available for home buyers who need a smaller deposit through the three Home Guarantee Schemes.
The federal government’s Home Guarantee Scheme, which includes the First Home Guarantee, the Regional First Home Buyer Guarantee, and the Family Home Guarantee, is now accepting applications for FY25 spots. This scheme, managed by Housing Australia, allows eligible buyers enter the property market sooner by providing them with the option of securing a mortgage with a low deposit without paying Lenders Mortgage Insurance (LMI).
Eligible buyers can apply for a loan with as little as a 5% deposit for the First Home Guarantee or the Regional First Home Buyer Guarantee, and a 2% deposit for the Family Home Guarantee. The government then guarantees the remaining amount.
Starting July 1, the available spots are:
35,000 for the First Home Guarantee (FHBG)
10,000 for the Regional First Home Buyer Guarantee (RFHBG) until June 30, 2025
5,000 for the Family Home Guarantee (FHG) until June 30, 2025
Since January 2020, over 160,000 Australians have bought or built homes with the scheme’s help. The scheme’s share of the first home buyer market has grown significantly, with almost one in three first home buyers in 2022-23 using it, compared to one in seven in 2021-22.
With the popularity of these schemes in mind, the government expanded the criteria last year to allow more buyers to apply. This included allowing friends, siblings and other family members to apply, opening up the First Home Guarantee to non-first home buyers who haven’t owned property in Australia in the past 10 years and enabling legal guardians to access the Family Home Guarantee.
Wondering whether these schemes could apply to you? Get in touch with our teamtoday to find out what schemes and incentives you could take advantage of to make your home buying dreams a reality.
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.
There are many different ways to purchase property – and one of those ways actually involves committing to purchasing a property that doesn’t yet exist.
Buying real estate ‘off the plan’ means committing to purchasing a property that is still in the pre-construction or early construction phase, often long before a building or development project is completed. Many home owners and investors see buying off the plan as a good way to purchase a brand new property, however, just as with any investment, there are pros and cons to consider – so let’s have a look at them.
The benefits of purchasing property off the plan
Lower Purchase Price One of the main attractions of buying off the plan is the potential to secure the property at a lower price than it would be once construction is finished. Developers often offer discounts and incentives to early buyers which can result in significant savings.
Potential Capital Appreciation In a rising property marketing, purchasing off the plan can be a smart investment strategy. As property values will likely increase during the construction period, buyers may benefit from capital appreciation ever before they’ve settled on the property.
Customisation Opportunities This benefit particularly applies to home owners, but also provides investors with opportunities to boost their potential rental income. Purchasing off the plan often gives you the chance to customise certain aspects of the property, including selecting finishes, materials or layout preferences to suit their specific needs and tastes.
Delayed Payment When purchasing off the plan, buyers typically pay a deposit upfront and the rest of the purchase price upon completion. This extended settlement period provides you with extra time to save or secure finance.
Stamp Duty Savings As Stamp Duty is only payable on the land for off the plan purchases, you could be savings thousands of dollars on your purchase.
Deposit Options Whilst most buyers pay cash to secure their deposit, purchasing off the plan provides you with other more flexible deposit options to consider, including Bank Guarantees and Deposit Bonds. It’s always best to check with your property consultant as to what method of payment the develop is happy to accept.
Tax Advantages Being a new property, investors can claim depreciation which is a major tax incentive. This helps to reduce the ongoing costs of holding the property, allowing you to build a larger portfolio.
The disadvantages of purchasing property off the plan
Uncertainty One of the things that potentially buyers are often afraid of is the uncertainty of buying off the plan. As the property is yet to be constructed, buyers have to rely on floor plans, artist impressions and development promises as they’re not yet able to see the final product.
Construction Delays and Risks Construction projects can face unexpected delays due to various factors, such as weather, planning permits, development applications or financial issues. These delays may result in buyers having to wait longer for the property’s construction, impacting their plans.
Market Fluctuations Whilst a rising property market can bring capital appreciation, a declining market can have the opposite effect. If property values drop during the construction period, buyers may find themselves with a property worth less than they originally paid.
Changes in Financial Circumstances A buyer’s financial situation may change between time of purchase and completion, as well as general economic circumstances. This can make it harder to secure financing or meet the financial requirements during settlement.
How can you mitigate risk and increase your chances of securing finance for your off the plan purchase?
As mentioned above, economic or personal circumstances may change between the time of purchase and completion, however, below is what we always recommend our clients do to ensure they can reduce risk and have the best chance of securing finance for their property:
Increase your savings This will help to cover any unlikely shortfalls
Do not apply for any lines of credit during this time Don’t be tempted by credit card offers and avoid signing up for any additional lines of credit whilst waiting for your property to be completed. This could impact your borrowing capacity or credit rating.
Ensure all commitments are paid on time and up to date No lender likes to see late or outstanding payments, so make sure you’re paying all commitments on time.
Don’t change employment Some lenders can have issues with short term employment so it’s important that you chat to us should your employment change.
Maintain or reduce your living expenses Increasing your lifestyle costs may reduce your borrowing capacity so it’s important to keep an eye on your budget.
What should you consider when purchasing off the plan?
We’ve talked about the pros and cons, but what things do you need to consider when purchasing off the plan?
Research the developer You want to make sure that you thoroughly research the developer’s reputation, track record and completed projects prior to committing to an off-the-plan purchase as this will give you an idea of their creditability and their quality of work.
Understand the Contract Ensure you carefully review the purchase contract with the help of a legal professional. Pay close attention to clauses regarding potential changes in the property’s design, timeline and provisions for compensation in case of construction delays.
Finances It’s important that you know what you assess your financial situation and consider the risks associated with the investment before committing. When working with Sanford Finance, we’ll sit down to work out your goals, discuss potential risks and action plans and discuss contingency plans in case of unforeseen circumstances to ensure you’re not jumping into anything you’re not prepared for.
Location and Market Analysis Think about the location of the development and its potential for future growth. Consider things like the demand for similar properties in the area and evaluate the long term investment potential for the property.
What finance options are available during the construction phase?
Purchasing a property off the plan can be quite stressful and challenge even the best laid plans, however, our construction loans take a lot of stress out of the equation.
A construction loan most commonly has a progressive drawdown where you receive instalments of the loan at various stages of construction, rather than receive it all at once at the start.
This means that you generally only pay interest on the amount that is drawn down, as opposed to the entire loan amount.
A number of lenders also offer construction loans that are interest-only during the construction period, later reverting to a standard principal and interest loan once the build is complete.
Construction Loan Case Study:
Craig and Belinda are purchasing land for $300,000 in Adelaide and building a new home for $400,000 for a total value of $700,000. They are borrowing 95% or $665,000. Assuming an interest rate of 5.95%, the repayments required by Craig and Belinda during the build phase will look like this:
Current Loan
Current Loan
Current Loan
Min. Monthly Repayment Required
Land Loan
Nil
$265,000
$1,314 IO
Deposit 5%
$20,000
$285,000
$1,413 IO
Base 15%
$60,000
$345,000
$1,710 IO
Frame 20%
$80,000
$425,000
$2,107 IO
Enclosed 25%
$100,000
$525,000
$2,603 IO
Fixing 20%
$80,000
$605,000
$2,999 IO
Practical Completion 15%
$60,000
$665,000
$3,966 P&I
Totals
$400,000
$665,000
IO = Interest Only P&I = Principal and Interest
In the above table we can see that the repayments steadily increase over time and are interest-only during the build phase. Once the final payment is made, a construction loan will generally convert to Principal and Interest repayments.
How do you get started?
Buying off the plan can be exciting and nerve wracking all at the same time, but we’re here to help. We’ve helped many clients secure their dream property or investment property off the plan and know what you should be looking for, what lenders are looking for and are here to help you navigate the off-the-plan market more confidently.
