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The Reserve Bank (RBA) may have kept the cash rate on hold but that hasn’t stopped some lenders from hiking their variable home loan rates. Here’s how borrowers are fighting back.
Home owners may be celebrating two months of the RBA cash rate staying on hold. But don’t pop the champagne cork just yet.
Mozo reports that some lenders have sneakily hiked their variable home loan rates in July despite the cash rate holding firm.
These hikes, known as ‘out-of-cycle’ rate rises, can fly under the radar.
So it’s important to keep an eye on what your lender is doing.
Mozo says ANZ, Commonwealth Bank, Macquarie, Easy Street and Great Southern Bank are among the lenders that have topped up their variable loan rates even though the cash rate has stayed on hold.
In some cases the upticks may be as little as 0.03% – but some lenders have lifted their variable rates by as much as 0.15%.
On a $500,000 loan that could mean paying an extra $750 each year.
And right now every penny counts.
As a result, some home owners are taking matters into their own hands to help stay afloat.
Research by Canstar shows almost half of Australian mortgage holders are navigating higher rates by doing the following:
– 35% are reducing extra repayments,
– 29% are stopping extra loan repayments altogether,
– 26% are tapping into redraw or offset funds to help with repayments,
– 22% are refinancing to a lower rate loan, and
– 12% are extending their loan term.
Other changes involve switching to interest-only repayments, as well as more drastic moves such as selling a home or investment property.
While the above strategies can help get you through a tough time, it would be remiss of us not to mention that some of them can come at a cost over the long term.
Reducing or stopping extra payments, for example, means you’ll likely have your home loan longer and therefore pay more interest.
Likewise, if you tap into your redraw or offset funds, you’ll pay more interest each month.
Last but certainly not least, by extending the term of a $500,000 loan at 6.73% from 20 to 25 years you could cut your monthly repayments by $348. But according to Canstar calculations, it could also mean paying a whopping $123,464 in extra interest over the life of the loan.
Those sneaky out-of-cycle rate hikes aren’t just annoying. They can leave you out of pocket while beefing up your lender’s profits.
But you don’t just have to wear the cost.
The first step is knowing the rate you’re paying.
Check your loan statements, or ask us to investigate for you.
If you’re not happy with the rate, we can help ask your current lender for a discount.
And if they don’t come to the party, we can help you weigh up the possible costs of making a switch.
We can help you crunch the numbers to reveal which strategy will help you save today – and tomorrow.
So give us a call to find out if your lender is quietly lifting your loan rate and what you can do about it.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Mortgage holders rejoice – the Reserve Bank of Australia (RBA) kept the cash rate on hold in August for the second month in a row. So have we finally reached calmer waters? Or is there one last rate rise wave headed our way?
In what many will see as better news than a Matildas’ World Cup win, the RBA held interest rates steady in August for the second month in a row.
After a relentless string of rate hikes (12 since April 2022), homeowners may be sceptical about what’s happening.
So is the RBA board finally satisfied we’ve endured enough rate hikes? Or is RBA Governor Philip Lowe saving one last rate hike for mortgage holders as a parting gift before he vacates his position next month?
Let’s take a closer look at some of the underlying data.
The RBA has made it clear that it has been hiking rates to help lower inflation.
So it was welcome news this week when the Australian Bureau of Statistics announced that annual inflation has dropped to 6.0%.
It’s fair to say most of us wouldn’t normally celebrate goods and services prices rising 6% over the past year.
However, it’s a sign that inflation is still falling from its peak of 7.8%, and that’s exactly what the RBA has been aiming for.
The RBA knows it’s treading a fine line with interest rate decisions. At its August board meeting the central bank explained why it kept interest rates in a holding pattern:
– It can take time for the economy to respond to previous rate hikes.
– The outlook for household spending is uncertain. Many households are experiencing a squeeze on their finances. Others are benefiting from rising housing prices and higher interest income.
– Consumer spending has slowed “substantially” due to cost-of-living pressures and higher interest rates.
Inflation is down. Rates are steady.
So far, so good.
But we may not be in calmer waters just yet.
As this diagram shows, inflation is still well above the RBA’s target range of 2-3%.
So the RBA has left the door open for further rate hikes depending on how the economy is tracking, and of course, what happens with inflation.
Indeed, the RBA said as much in its latest rate announcement: “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe”.
As mentioned earlier, RBA Governor Philip Lowe will vacate the top job on September 17 and be replaced by his deputy, Michele Bullock.
Thus, one might think that if any more rate rises were planned in the short term, they’d take place before that transition occurs to help give Ms Bullock a clean slate to work from (assuming inflation data continues on a downward trend). And there’s only one RBA board meeting between then and now – on September 5.
Indeed, Westpac has made a bold call, saying we could be heading into a lengthy period of stable rates ahead of a rate cut, possibly in the second half of 2024.
So, with any luck, we could be through the thick of it.
Then again, all things considered, interest rates are now much higher than they were 18 months ago and will likely remain so for some time.
So if it’s been a while since you last looked at your home loan and current interest rate, call us today to make sure you’re paying a competitive rate on a loan that’s well-suited to your needs.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
With plenty of pundits tipping interest rates will start to fall in the next 12 months, we look at why the big banks are hiking their fixed rates – and unpack what it means for the rate outlook.
The past few months have seen interest rates on fixed home loans deliver more ups and downs than a rollercoaster.
As recently as April 2023, a number of lenders were starting to cut their fixed rates.
Fast forward to July, and the major banks – NAB, Westpac, ANZ and the Commonwealth Bank – have all upped their fixed rates in the past fortnight.
Now you won’t find a fixed rate below 6% among the big four banks.
Home owners battling high rates are generally being urged to “hang in there” because interest rates are expected to slide down from their current highs over the next 18 months.
Westpac is predicting the Reserve Bank’s cash rate will drop to 3.85% by the end of next year.
Better still, NAB is anticipating the cash rate could dip to 3.10% by late 2024.
Some lenders are stepping up their fixed rates because they believe rates may go higher before they trend lower.
NAB and Westpac are both tipping the cash rate, currently sitting at 4.10%, could go as high as 4.60% by the end of the year.
Over at the Commonwealth Bank, the expectation is for one more rate hike, taking the cash rate to 4.35%, with a chance the cash rate may ratchet up to 4.60%.
This can all be confusing. The main point is that the prospect of rates heading higher before they head south again is a key factor driving some fixed rates higher.
The first step is to bear in mind that forecasts are just that – predictions. Not even the banks have foolproof crystal balls.
And the recent news that inflation slowed in the June 2023 quarter, with quarterly price rises being the lowest since September 2021, could see the Reserve Bank ease back on the interest rate dial. It could even bring fixed rates back down.
It’s also worth pointing out that not every lender is lifting their fixed rates.
A number of smaller lenders have trimmed their fixed rates, with some still offering rates below 6.0%.
That’s why it’s so important to get in touch so we can help you explore a wide range of lenders and loan products.
Locking in your loan rate can bring certainty to your budget, and eliminate the stress of the rollercoaster rate ride.
If you’re not sure whether to go variable or fixed – or a combination of both – get in touch to see how the numbers stack up for your situation.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Australians are showering their homes with $1 billion worth of love each month as home improvement spending ramps up. We look at the cost of popular renovations – and how to foot the bill.
Belts may be tightening but not, it seems, for renovators.
The latest figures from the ABS show Australians spent a whopping $1,044 million on home renovations in May 2023 alone. That’s up 4.3% on the previous month.
Our passion for renovating may stem from binge-watching home improvement shows through the pandemic. But there could be another factor at play.
It can simply be a lot cheaper to renovate your home than to sell up and buy elsewhere.
If you’re thinking of a few home improvements, here’s what to consider.
The 2022 Houzz & Home Report reveals which rooms Australians have targeted for home improvements.
The kitchen comes up trumps, accounting for almost one in four (23%) renovations.
Other top contenders were living room, bathroom and bedroom makeovers (each 20%).
A key step in planning a renovation is crunching the numbers to know the likely cost. This is a must-do before you start collecting colour charts and carpet samples.
Smaller renovations can be affordable do-it-yourself projects. For any structural or specialist work it pays to call in the tradies – and that’s when the cost can start to escalate.
The latest Archicentre Cost Guide sets out typical costs for popular home improvements.
As a guide, you can expect to pay:
– $75-$120 per square metre to polish timber floorboards;
– up to $35 per square metre for interior painting;
– up to $4,600 for an extension; and
– up to $48,000 for a new kitchen (excluding appliances).
While home improvements may not come cheap, quality renovations can boost your lifestyle and your home’s value.
They can also be a money-saver – ‘green’ improvements such as installing rooftop solar panels can put money back in your hip pocket through lower utility bills.
Working out how you’ll pay for a renovation is an essential part of the planning process.
You need to be sure you can comfortably afford the improvements, and avoid the not-so-exciting prospect of running out of funds mid-way through a project.
Using cash savings or a personal loan may be suitable for smaller projects – the shorter term of a personal loan (usually less than five years) can help keep a lid on the interest cost.
For more expensive projects, a home loan top-up can be a quick and easy solution, though it can hinge on you having sufficient home equity to qualify for additional funds.
At the top end of the scale, a dedicated renovation or construction loan is another option.
These can work by drip-feeding funds as different stages of the project are ticked off. You generally only pay interest on funds drawn down, making the cost more manageable.
If a renovation is on your bucket list, call us to discover the options available to fund your project – and the costs involved.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Buying a home for the first time can be challenging, especially with house prices soaring in recent years. So could switching from house hunting to unit searching be the way forward for you?
There’s no denying that getting into the property market in today’s economic climate ain’t easy.
The average Australian house price is now $725,000 – that’s 30% more expensive than the average national unit price.
Compare the price gap to September 2021, when the national median house price was $570,000 – just 9.6% higher than the median unit price of $520,000.
But is opting for a unit the right move for you?
Today we’ll look into the pros and cons of buying an apartment for your first home.
First the pros: units are usually more affordable than houses.
Median capital city house prices have grown 31.6% in the past five years, while units have only increased by 9.8%.
Lower prices can not only make it quicker for you to save a deposit for an apartment, they could also make you eligible for better stamp duty concessions (either reducing your stamp duty bill or eliminating it entirely, depending on your state or territory).
And while a unit may not always have space to accommodate future expansions to your life and family, they are often located in thriving local community hubs with amenities, shops, and transport on your doorstep – great for young families still wanting to be in the thick of the action.
Admittedly, owning a house can have advantages over owning a unit.
For starters, you don’t have to fork out for body corporate fees. And the capital growth you can gain from owning the plot of land your abode sits on often makes house ownership more attractive.
But buying a unit – rather than holding off until you can afford a house – also offers investment potential.
By purchasing a unit, you’re investing and building up your own equity, rather than paying off someone else’s mortgage if you’re renting.
So while you may not be able to buy the house just yet, an apartment can provide a valuable stepping stone to reaching that goal.
And should you be in a position to hang onto your unit when you upgrade to a home, you may get some decent rental income – if you buy in the right spot.
On top of this, unit upkeep can be easier because those body corporate or strata fees go towards various maintenance activities.
All that said, if apartment living isn’t for you, there are other cost-effective options for you to explore.
You could consider searching slightly further afield, with recent research identifying “sister suburbs” that are up to 200% cheaper than their in-demand neighbouring suburbs.
Rent-to-own arrangements could also make it easier for you to crack the market. These arrangements enable tenants to buy the property they’ve been renting once the lease ends, at a previously agreed price.
And whether you’re in the market for a house or a unit, there are government schemes that can help you fast-track home ownership and save.
The federal government has three low deposit, no lenders mortgage insurance (LMI) schemes available for eligible first-home buyers, regional first-home buyers, and single parents.
Eligible buyers can purchase a home with a deposit as little as 5% through the First Home Guarantee and Regional First Home Guarantee. While the Family Home Guarantee assists eligible single parents and guardians to buy with a 2% deposit.
Not paying LMI can save you anywhere between $4,000 and $35,000 – depending on the property price and your deposit amount.
The good news is that eligible first-home buyers can bundle the federal home guarantee schemes with other state government first-home buyer grants and stamp duty concessions for major savings.
If you’d like to give renting the big swerve and get a place of your own, give us a call.
Not only can we help you find a suitable loan and help organise your finances, we know the government schemes you may be eligible for to help get you into your first home sooner.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Phew! The Reserve Bank of Australia (RBA) has today decided to put the official cash rate on hold. So is the end of this rate hike cycle finally in sight?
The decision to keep the official cash rate at 4.10% will be welcomed by homeowners around the country after monthly repayments increased by about $1,135 per $500,000 loaned (for a 25-year loan) since 1 May 2022.
RBA Governor Philip said as interest rates had been increased by 4% since May last year, the Board decided to hold interest rates steady this month to provide some time to assess the impact of the increases.
“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy,” he said.
However, Governor Lowe kept the door open for potential rate rises in the months to come.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve,” he said.
“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the forecasts for inflation and the labour market.
Let’s say you’re an owner-occupier with a 25-year loan of $500,000 paying principal and interest.
If the RBA increases the cash rate by another 25 basis points, and your bank follows suit, your monthly repayments could increase by another $76 a month. That’s an extra $1,211 a month on your mortgage compared to 1 May 2022.
If you have a $750,000 loan, repayments would likely increase by about $114 a month, up $1,816 from 1 May 2022.
Meanwhile, a $1 million loan would increase by about $152 a month, up about $2,422 from 1 May 2022.
Are you starting to feel the pinch? You’re not alone. Many households around the country are feeling the pain of all the rate rises over the past 15 months.
There are also lots of people on fixed-rate home loans wondering what options will be available to them once their fixed-rate period ends.
Some options we can help you explore include refinancing (which could involve increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a bit of a buffer in an offset account ahead of more rate hikes.
So if you’re worried about how you might meet your repayments going forward, give us a call today. The earlier we sit down with you and help you make a plan, the better we can help you manage any further rate hikes.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.