11. February 2019 18:50
When the banking Royal Commission was announced in December 2017, many commentators believed a large proportion of the final report would be on home loan lending.
In particular, the way the banks lend to home buyers as well as the amount. At its most extreme, there was speculation that someone on an $80,000 income would only be allowed to borrow $200,000.
The effects on lending
Anyone who has applied for a home loan since this time would have found how much harder it now is. As part of responsible lending, more information now has to be provided as to expenses, income and existing debts. While frustrating for some, it is a positive in ensuring that people don’t over borrow and get themselves into financial stress.
On realestate.com.au we can see clearly that access to finance, as well as the cost of finance, is closely linked to search activity. For markets like Melbourne and Sydney, it led to a change in sentiment towards property as people found it harder to get loans.
For Perth, a market that was starting to recover in 2017, it derailed the recovery and led to further price falls in 2018. Although property fundamentals are overall positive in these market (i.e. population and jobs growth are looking pretty solid), less money available affected the market.
While the impact of the Royal Commission on the market will be minimal from this point forward, the way that you get a loan may change. At the moment, over half of all people applying for a home loan do so through a mortgage broker. One of the biggest announcements in the Royal Commission was that trailing commissions should be abolished, and instead be replaced by an upfront fee paid by the person applying for the loan.
At this stage, the Morrison Government has rejected the upfront fee model and instead recommended that the banks pay this fee. So for now, you can still use a mortgage broker without paying an upfront fee, but this may change.
What happens next?
With the Royal Commission out the way, where to now for residential property? It is possible that access to finance will continue to ease up.
In 2018, APRA removed the cap on the number of interest only loans that banks could provide; a restriction they put in place in 2017. They also removed the speed limit imposed on how much banks could increase their lending to investors. This move was implemented in 2014 and restricted investor lending growth to 10% per annum.
The risks around investors borrowing too much seem to have passed.
The next big hurdle for property will be the Federal Election, expected to be held in May 2019. With greater certainty now around access to finance, the outcome of this will give us an idea as to how tax incentives for investors will be handled from that point forward.
Best case, we are looking at far more stable conditions for the second half of the year.
11. February 2019 18:45
Author: P&N Bank (sponsored content)
Buying property will undeniably be the largest and potentially, the most profitable investment you make.
Your first home is what gets you on the property ladder and can either set you up for the future or hold you back from your long term dream property.
For some, your first home will not be the one you raise your family in, but it is another step in the right direction and if you make the right decisions with your first house, you will be able to secure your ideal family home in an area you love.
Generally speaking, it is natural to have emotions running high when you make that first purchase, as the house hunting and finance process can be exhausting. Try to avoid this by taking your time to research, seek professional advice and make a decision based on your budget and lifestyle goals.
Months, even years of savings could all be sacrificed for a property you buy that loses you money. Alternatively, a clever first purchase that grows in value could leave you never having to save money again for a deposit on your next home.
REIWA President Damian Collins said the first home you buy is the most important because its capital growth is how you create equity to be able to afford to trade up to the next home.
“Most people buy at the lower end of the property market for their first home and through their lives, many move into higher price brackets as their family and income grow,” Mr Collins said.
The first step to achieving your house goals is saving a deposit for your first property purchase. How much you save can ultimately affect what, where and when you buy, as well as how much you are able to borrow from the bank. All of these factors will point to you being ready or not to buy a property that will give you the best first start in the property market.
Think long term, not just about the appeal of the property today. The best way to set yourself up is through your first home purchase, this again comes back to ensuring your first property is a smart investment decision.
“Quite often existing homes that are a little older in established suburbs grow in value more than brand new homes in the outer suburbs. It’s nice to have everything brand new, but remember, the first property is the stepping stone to your dream home,” Mr Collins said.
It is important to consider your long term goals, as many people strive to raise their families in nice communities close to schools, parks and recreational facilities. Get yourself used to the locations you like living in and where you can see yourself raise your children or if you plan to in the future.
While the entire first home buying experience can be a weight on your shoulders, you can take the stress out of the finance barrier by ensuring you see a P&N Bank Home Loan Specialist.
P&N Bank have Home Loan Specialists who make it their goal to ensure your home loan journey is as smooth as possible. P&N Bank also offer a range of home loan products and tools to help you throughout your home buying process, including flexible repayment options to help you save.
For more information about home loans, visit pnbank.com.au.
11. February 2019 18:45
Author: Bankwest (sponsored content)
Not sure if it’s the right time to spend your hard-earned money on a home deposit? These signs might indicate you’re ready to stop renting and take the plunge.
1. You want an asset that may grow in value over time
This is what’s known as capital growth. If your property value increases, so does your equity, which is the difference between your property’s value and what you owe on your home loan.
Down the track, you could potentially use this equity for other things like further investments, home renovations, or as a deposit for your next home.
2. You want more stability
If you buy your own home, there’s no risk that a landlord will tell you to move out. What’s more, owning a home can offer additional security in retirement, as you won’t need to worry about paying rent after you stop working.
3. You want to make a home your own
Buying a home means you have freedom to make changes to it. You can mount a TV on the wall, update the carpet or recreate that gallery wall you saw on Pinterest.
4. You can afford the mortgage repayments and ongoing costs
Home loan repayments might be more affordable than you think. The Bankwest borrowing power and repayments calculator can help you work out how much you could borrow and what your repayments might be.
Compare the repayment estimates to what you’re currently spending on rent and you might be surprised to find there may not be that much of a difference.
Keep in mind that there are some ongoing costs involved in buying a home that you don’t need to worry about when renting, like council rates, strata fees and property upkeep.
Find out what your borrowing power is to see what you can afford.
5. Covering the deposit and other upfront costs is doable
Generally, you need to have a deposit of at least 20 per cent of the property purchase price, and be prepared for the other upfront costs of buying a home, like stamp duty, insurance and inspections. Our home loan fees calculator can give you an idea of what they add up to.
But covering a deposit might be more doable than you think. Find out more about how much deposit you need, including what to consider if you want to make a deposit that’s smaller than 20 per cent.
Or how about buying and renting at the same time?
If you can’t afford to buy a property in an area you want to live or you’re not ready to put down roots, you might like to consider something called ‘rentvesting.’ This involves living in a rental property while buying an investment property in a more affordable area.
Before you take the plunge
Buying a home is a big decision and there’s a lot to think about first. Bankwest’s Home Finance Managers can answer any questions and talk you through what’s possible.
Disclaimer: Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945