There has been a lot of “will they, won’t they” speculation about the RBA’s cash rate announcements. Interest rates are big news as they have a significant impact on the financial decisions we face, so what does it mean that fixed rates are on the move?

Recently, we’ve begun to see some movements for the fixed interest rates, with a number of lenders starting to cut their fixed rates after many years of rises (and some stagnation) in anticipation of a future rise to come.

To understand the current landscape, it’s essential to grasp how interest rates work. The Reserve Bank of Australia (RBA) plays a crucial role by setting the cash rate during its regular meetings. The cash rate is the interest rate on overnight loans between banks and is a key tool for managing inflation and economic growth. When the RBA changes the cash rate – either raising it to combat inflation or lowering it to stimulate the economy—these adjustments ripple through the financial system.

However, fixed interest rates are a bit different. While variable rates fluctuate with the cash rate, fixed rates are determined by individual banks based on their expectations of where the cash rate is heading in the future.

The current trend of fixed rates declining

In recent months, we’ve started to see a decline in fixed interest rates across some providers. So, what’s contributing to this shift?

Inflation trends:

While inflation surged during the pandemic, there are signs that it is stabilising and even declining. With inflation expectations easing, banks may feel more confident in offering lower fixed rates.

RBA’s role and commentary:

The RBA has adopted a cautious approach, being very open about its commitment to stabilising inflation as its major focus. Changes to the cash rate by the RBA are a powerful lever in bringing inflation down. The RBA has stated its objective is to get consumer price inflation (CPI) back down to between 2 and 3 per cent and the trend is now heading in that direction.

This kind of shift signals to banks that the environment may become more favourable for borrowing, prompting them to reduce fixed rates in anticipation of a better lending landscape.

Increased competition:

The mortgage market is highly competitive, with lenders eager to attract borrowers. As banks compete for your business, lowering their fixed rates can be a way to gain an edge. This is good news for borrowers, as it leads to more attractive options in the market.

Considerations

It all means fixed rates are becoming relatively more attractive to borrowers, but the question is whether the initial moves are enough to shift the market somewhat away from variable rates.

With the cash rate still on ice for now, more than 95 per cent of home lenders are opting for variable deals. This is a remarkable difference from the height of the pandemic, when fixed rates accounted for as much as 46%  of loans issued.

If you are thinking of taking on a fixed rate loan or refinancing to a fixed rate it’s important to consider timing. Interest rates can fluctuate, the landscape remains dynamic, and predicting their movement can be challenging.

It’s also important to weigh up the pros and cons of fixed versus variable loans. The beauty of fixed rate loans is the stability in repayments protects you from rising rates and simplifies budgeting. So, for those who value or need that certainty – say your debt level is high, your cash flow position isn’t strong, and you want to take some risks off the table – fixed rates can be a viable approach. Lower fixed rates can also lead to significant savings; however, you do need to consider that it is likely to be early days for fixed rate movements and you may miss out on further savings should rates continue to fall, when the cash rate is revised downwards. Additionally, fixed loans often have limited flexibility regarding extra repayments or early exit fees.

In any case, whether you’re a first-time buyer or looking to refinance, it’s good to stay informed as understanding the current climate can empower you to make the best decisions for your financial future.

We can help you navigate this evolving landscape and make the most of the options available to you.

If you are starting your journey to buy a home, one of the first things you need to do is determine what you will be able to borrow so you are narrowing the field to hone in on properties you will likely be able to afford.

A couple of the terms you may have come across when you are at this stage of determining your borrowing power are ‘pre-qualification’ and ‘pre-approval.’ While these sound like they might be the same thing, there are some important distinctions between them a home buyer needs to understand.

Differentiating between pre-qualification and pre-approval

When applying for a loan, the main difference between pre-qualification and pre-approval lies in the depth of scrutiny and commitment from the lender, with pre-qualification being more of a guideline and pre-approval being more solid.

Pre-qualification – a non-binding estimate

Pre-qualification is the first step in the mortgage process, providing an estimate of how much you may be able to borrow based on self-reported financial information. This preliminary assessment typically involves a basic questionnaire or a conversation regarding your income, assets, debts, and credit score.

There are some benefits to going through the pre-qualification process. It gives you a general idea of the price range of homes you can consider, guiding your initial search.

Pre-qualification usually does not involve a hard credit inquiry, so does not have any impact on your credit score and finally it provides early insights into potential financing options.

However, it’s important not to make the mistake of thinking a pre-qualification and pre-approval is a binding indication of how much a lender is willing to provide. As the information you provide is not verified, it’s considered less reliable and it’s a good idea to consider a pre-qualification as more of a ballpark figure of what you could potentially borrow.

Pre-approval – a detailed commitment

Pre-approval is a more rigorous process where a lender verifies your financial information and provides a conditional commitment to lend up to a specified amount under certain conditions. This involves submitting documentation such as wages, bank statements, and tax returns for thorough evaluation so you’ll need to get your financial house in order prior to the pre-qualification process.

At this stage we’ll work with you to review your options in terms of mortgage products and lenders. When you are ready to apply for pre-approval, the selected lender then verifies this information and performs a credit check to assess your financial situation in detail. Based on this verification, the lender provides a conditional commitment to lend you a specified amount under certain conditions.

The advantages of pre-approval for property purchases

As we enter the warmer months the housing market typically sees increased activity and competition among buyers, which is why obtaining pre-approval should be a priority if you are getting serious about buying. Pre-approval does not just provide potential lenders with a comprehensive view of your financial health, it also empowers and informs your decisions. Knowing your approved loan amount allows for more precise budgeting and confident negotiations.

Armed with a pre-approval letter, you can concentrate on properties within your budget range, optimising your time and efforts. In a bustling market, sellers are more likely to favour offers from pre-approved buyers due to greater assurance of financial capacity and the potential for a swift transaction.

Pre-approval will also enable you to move faster and speed up the process of finalising your loan should you be successful in your bid for your new property. When you find the right home, the last thing you want is to miss out as your finances took too long.

Planning ahead for a successful purchase

If you want to purchase in the next few months, now is the ideal time to start preparing for your home purchase journey.

Start your journey with confidence by chatting to us at the pre-qualification stage and obtaining pre-approval early, ensuring you’re well-positioned to capitalise on opportunities and achieve your homeownership dreams as the property market warms up alongside the weather.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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At its latest meeting, the Reserve Bank Board announced it was leaving the cash rate at 4.35%.

Please click here to view the Statement by Michele Bullock, Governor: Monetary Policy Decision.

With the official rate on hold, we’re watching closely what the banks do with their rates, as some of Australia’s biggest lenders may change their rates.

You will be notified directly by your bank if and when they change their interest rate.

Please get in touch 03 9723 0522 if you would like to discuss recent rate movements or if you would like to review your finance options.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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New world order: Surprise cities climbing the residential ranks

There’s been yet another changing of the guard in Australian property along with the arrival of spring.

Rarely seen in close to four decades of real estate record keeping, Melbourne values have dipped below those of Adelaide and Perth, signalling a shake up for capital city property prices.

In June, Brisbane’s median dwelling value had already surpassed the Victorian capital and Canberra to take out second place on the CoreLogic totem pole, and now just two months later, it has fallen to fifth on the list.

Cost of living pressures and a continued plateau in the official cash rate by the RBA has resulted in a quieter than average winter in real estate. CoreLogic’s September Home Value Index revealed that national home values rose only 0.5% during August, representing 19 months of consecutive increases.

Smaller city standouts

For much of the past two years, Perth, Adelaide and Brisbane have led the pack in terms of growth rates among Australia’s capital cities. Perth, in particular, has seen extraordinary growth with values up 23.24% annually, followed by Adelaide at 15.12% and Brisbane at 13.95%.

This rapid rise has propelled both Perth and Adelaide prices past Melbourne. The South Australian capital’s median dwelling value is now at $790,800 while Perth’s is $785,250, compared to $776,044 for Melbourne – now the third lowest median among the capital city markets. Only Darwin and Hobart are now cheaper.

Melbourne’s market explained

It’s the first time Perth’s median dwelling value has been higher than Melbourne’s since February 2015, when the city was coming off an iron-ore boom. Adelaide has never recorded a median value higher than Melbourne in CoreLogic’s 40-year dwelling value series.

Melbourne’s real estate landscape has been on a downward trend for six consecutive months, which is attributed to a range of factors, from affordability constraints and elevated interest rates, to changes in investor sentiment and Victorian tax levies.

What’s also worth noting is that Melbourne is a unit-heavy market, where apartments account for approximately a third of the city’s housing stock—compared to just 16 per cent in Perth and Adelaide. This skew toward unit prices drags down the overall median dwelling value and, in reality, median house and unit values across Perth and Adelaide are still lower than in Melbourne.

Dwelling values over the quarter

Melbourne

Currently with a dwelling median sitting at $776,044, after a quarterly fall of -1.2%, Melbourne is  now one of Australia’s more affordable cities according to CoreLogic data. Since the onset of Covid in March 2020, the Victorian capital’s median has increased by 10.1 per cent, representing an average $71,196 move in home prices. Currently, the gross rental yield is 3.7%, however investors are collectively reevaluating their property portfolios since the introduction of a new Victorian land tax on non-primary residences.

Sydney

The median value of homes in Sydney is $1.18 million after a modest three-month movement of 0.8%. At the beginning of the pandemic, Sydney’s median was $263,838 less but has since risen 28.8%. The gross rental yield for investment properties in the Harbour City is currently 3.1 per cent.

Brisbane

Still holding its spot as Australia’s second priciest city for residential real estate, Brisbane’s median dwelling value is $875,040 after a quarterly increase of 2.9 per cent. Back at the start of Covid, the Queensland capital’s median was $344,896 less but has subsequently soared by 65.1%. Today the gross rental yield for the city is 3.7%.

Canberra

The national capital was knocked out of second place back in June and recorded a slight -0.2% decrease in the median dwelling value for the quarter to $845,875. Home values have risen an average of $201,558, or 31.3 per cent, since the start of the pandemic. The gross rental yield in Canberra is 4.1%.

Perth

On an incredible trajectory since March 2020, Perth’s median home value has skyrocketed 72.5% to $785,250. Over the last three months it was also home to the country’s largest capital city quarterly increase of 5.7%. Perth’s gross rental yield is sitting at 4.3%.

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (September 2024) 

If you have any questions or need any information please give us a call on 039723 0522.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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As the real estate market begins to bloom with opportunities for homebuyers, for those who wish to buy in the next few months understanding the distinctions between pre-qualification and pre-approval for a home loan can be pivotal in securing your dream home.

If you are starting your journey to buy a home, one of the first things you need to do is determine what you will be able to borrow so you are narrowing the field to hone in on properties you will likely be able to afford.

A couple of the terms you may have come across when you are at this stage of determining your borrowing power are ‘pre-qualification’ and ‘pre-approval.’ While these sound like they might be the same thing, there are some important distinctions between them a home buyer needs to understand.

Differentiating between pre-qualification and pre-approval

When applying for a loan, the main difference between pre-qualification and pre-approval lies in the depth of scrutiny and commitment from the lender, with pre-qualification being more of a guideline and pre-approval being more solid.

Pre-qualification – a non-binding estimate

Pre-qualification is the first step in the mortgage process, providing an estimate of how much you may be able to borrow based on self-reported financial information. This preliminary assessment typically involves a basic questionnaire or a conversation regarding your income, assets, debts, and credit score.

There are some benefits to going through the pre-qualification process. It gives you a general idea of the price range of homes you can consider, guiding your initial search.

Pre-qualification usually does not involve a hard credit inquiry, so does not have any impact on your credit score and finally it provides early insights into potential financing options.

However, it’s important not to make the mistake of thinking a pre-qualification and pre-approval is a binding indication of how much a lender is willing to provide. As the information you provide is not verified, it’s considered less reliable and it’s a good idea to consider a pre-qualification as more of a ballpark figure of what you could potentially borrow.

Pre-approval – a detailed commitment

Pre-approval is a more rigorous process where a lender verifies your financial information and provides a conditional commitment to lend up to a specified amount under certain conditions. This involves submitting documentation such as wages, bank statements, and tax returns for thorough evaluation so you’ll need to get your financial house in order prior to the pre-qualification process.

At this stage we’ll work with you to review your options in terms of mortgage products and lenders. When you are ready to apply for pre-approval, the selected lender then verifies this information and performs a credit check to assess your financial situation in detail. Based on this verification, the lender provides a conditional commitment to lend you a specified amount under certain conditions.

The advantages of pre-approval for property purchases

As we enter the warmer months the housing market typically sees increased activity and competition among buyers, which is why obtaining pre-approval should be a priority if you are getting serious about buying. Pre-approval does not just provide potential lenders with a comprehensive view of your financial health, it also empowers and informs your decisions. Knowing your approved loan amount allows for more precise budgeting and confident negotiations.

Armed with a pre-approval letter, you can concentrate on properties within your budget range, optimising your time and efforts. In a bustling market, sellers are more likely to favour offers from pre-approved buyers due to greater assurance of financial capacity and the potential for a swift transaction.

Pre-approval will also enable you to move faster and speed up the process of finalising your loan should you be successful in your bid for your new property. When you find the right home, the last thing you want is to miss out as your finances took too long.

Planning ahead for a successful purchase

If you want to purchase in the next few months, now is the ideal time to start preparing for your home purchase journey.

Start your journey with confidence by chatting to us at the pre-qualification stage and obtaining pre-approval early, ensuring you’re well-positioned to capitalise on opportunities and achieve your homeownership dreams as the property market warms up alongside the weather.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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Given the ever-fluctuating landscape of Australia’s property market and the current uncertainty as to what to expect for interest rates, it’s a challenging time for would-be home buyers and even for those with a mortgage.

Homebuyers are navigating this landscape cautiously, mindful of economic indicators and market shifts.

Throw into the mix the complexities of choosing the right mortgage loan and it’s no wonder many would-be buyers are feeling uncertain.

As uncertainty looms, securing a mortgage or even getting ready to buy can feel like navigating a maze without a map. That’s where it can be helpful to have an expert on your side to help light the way. Here are some of the ways we can lend a hand.

Expert guidance to navigate changing lending conditions

We stay abreast of changes in interest rates between lenders (which are independent of the RBA’s decisions on the cash rate) and keep up to date with changes in lending criteria, ensuring that you receive the most competitive rates available at the time, mitigating the risk of overpaying in a dynamic market.

Certainty in a dynamic market

It can also be helpful to have some certainty amidst a lot of other fluctuating factors so we can help you determine how much you may be able to borrow. We can also help you arrange a pre-approval which is like having a roadmap and a green light to go after your dream home.

Access to exclusive deals and rates

Securing the most favourable mortgage rates requires more than just good timing – it demands insider knowledge and industry relationships. Our extensive network enables access to exclusive deals and rates that may not be available through traditional channels which can translate into significant savings over the life of your loan.

In-depth knowledge of government grants

There’s plenty of government support available to first-home buyers in Australia, such as low deposit schemes, cash grants and shared equity programs, to name a few. We can help determine your eligibility, as well as which grant might be the most appropriate for your circumstances.

The value of expert negotiation

Negotiating terms with lenders requires a nuanced understanding of constantly changing market dynamics and lender practices. We advocate on your behalf to secure favourable terms, including lower interest rates, reduced fees, and flexible repayment options.

Tailored for you

We work with you to understand your financial situation and determine the best solution for your circumstances. Even if you have a unique financial situation—such as being self-employed, having variable income, or previous credit challenges we can offer suitable financing options and strategies to strengthen your mortgage application.

Acting in your best interests

We act in your best interest, prioritising your financial well-being over lender interests. We streamline the lending journey, offering clarity on fees, and ensuring you understand the implications of each decision. In a complex industry filled with jargon and fine print, we explain mortgage terms in plain language, ensuring you fully understand the commitments you’re making.

Clarity whether you are getting ready to buy – or reviewing your options

In uncertain times it makes sense to have some certainty. Getting help with the lending side of things, which can be complex and confusing, allows you to focus your efforts on finding and securing the ideal property.

If you are getting ready to buy it can be helpful to have an initial chat to get a sense of what you might be able to borrow and if you decide to get serious, we help with sourcing the right loan – and with all the paperwork to ensure everything is submitted correctly and on time.

If you have an existing mortgage reviewing your loan and whether it still suits your circumstances and future goals can be beneficial. Refinancing offers an opportunity to save on long-term interest costs amidst market fluctuations.

As you embark on your homeownership journey or seek to refinance in today’s economic climate, we can help you avoid problems and provide some stability and certainty.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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Tax breaks are always good news, but for house hunters they can have an added bonus. Not only do tax cuts mean potential buyers have more cash in their pocket at the end of the financial year, but they’re also looking at increased borrowing power.

A typical homebuyer’s borrowing capacity could rise by tens of thousands of dollars after July 1 as a result of this year’s Federal Budget.

Ways the Budget could boost your borrowing power

To put it simply, with lower income taxes you may have more disposable income available to repay your loans. Every Australian taxpayer will get a tax cut from July 1, 2024 under the updated stage three tax cuts – regardless of their income – with the exact amount depending on how much you earn.

Let’s take a potential single homebuyer on a $100,000 income looking at a 30-year loan with a typical interest rate of 6.19% and a loan-to-value ratio (LVR) of 80% or less. Their borrowing capacity will increase by about $25,000 in the new financial year. A future purchaser earning $150,000 could look at borrowing approximately $37,000 more than in the 2022/2023 financial year. Couples will likely be in an even stronger position.

While a tax cut is a much needed helping hand in the midst of a cost-of-living crisis, these tax breaks alone will not significantly improve your borrowing power.

How to improve your borrowing power

Borrowing capacities have fallen by about 30% since interest rates started rising in May 2022. With many top economists forecasting that a rate cut seems unlikely before the end of 2024, it pays for potential buyers to consider all the tools in your financial tool belt to improve your borrowing power and increase your chances of securing a larger loan.

Reduce your expenses

One of the most effective ways to improve your borrowing power is to reduce outgoings and unnecessary discretionary spending. Lenders take a close look at a borrower’s living expenses when calculating borrowing power, so tightening the budget belt can free up more income for loan repayments. Create a realistic budget for your household, track spending with the help of an app or spreadsheet and identify areas where you can cut costs.

Increase your income

Of course, it’s not rocket science, but if you earn more you’ll be able to borrow more. There are the traditional ways of boosting your income such as asking for a raise or picking up a second job. Then there are alternative “side hustle” or “gig” options like taking on freelance work, renting out belongings such as power tools, your car or car space, and selling items online. A higher income can boost borrowing capacity and make it easier to meet lender requirements for loan approval however it’s important to understand any tax implications that come with the additional earnings.

Review and reduce your credit card limits

Even if you keep your lines of credit at $0, lenders consider your limits as money already spent – with interest. High credit card limits can indicate a higher future level of debt with additional payments to navigate alongside a home loan. Review your credit card limits, their interest levels and reduce them where possible.

Reducing your debts

A debt-free (or low debt) mortgage applicant looks great on paper, so think about paying off as many of your existing debts as possible. Focus on those with the highest interest and try to pay them off first. Alternatively, talk to your lender about consolidating debts which will enhance your borrowing power by decreasing the debt to income (DTI) ratio.

Saving a larger deposit

Finally, a larger deposit will always make the biggest impact on your borrowing power as it reduces the LVR and demonstrates financial stability to prospective lenders. If you’re able to save a deposit of 20 per cent or more, there can be other savings. You may be able to access more competitive home loan interest rates and lenders won’t charge lenders mortgage insurance.

To discover how the 2024 Federal Budget’s tax cuts could improve your borrowing power, give me a call on 039723 0522..

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

Telephone : 03 9723 0522

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