Many real estate experts and economists are suggesting that even if banks cut home loan interest rates, then this wont be enough to encourage more property buyers into the Australian market. This is due to recent changes in lending laws and the fact that banks are making moves independent of the Reserve Bank of Australia (RBA) to raise interest rates.
While the RBA is continuing to hold its cards close to its chest there has been a talk of a rate drop later in the year. This is mainly due to what many economists are referring to as a lifeless economy and the possibility that unemployment may rise to over 6%.
However, economists are suggesting that even though a rate cut will make a property more affordable, it is possible that banks wont pass on these cuts to mortgage holders. There is also a possibility that the Australian Big Four banks ANZ, Westpac, NAB and the Commonwealth may even decide to raise rates independent of RBA decisions, as they have done previously. This is a concern to many home buyers, especially those looking to buy property in Sydney and Melbourne.
In November 2015, banks raised home loan interest rates by as much as .20 basis points. Prior to this, investor home loan rates were increased. Then in February 2016, business investment loan rates rose as well.
Economists are suggesting that banks are currently under pressure with no sign of a reprieve in sight. This pressure is due to rising wholesale funding costs and fierce competition from smaller lenders.
Banks that are currently challenging the Big Four include AMP and Suncorp, which have shaved their mortgage rates by .30 basis points to 4.08%. Smaller lenders are said to be offering home loans as low as 3.69%.
Clearance rates have continued to fall in Sydney and Melbourne after the Australian Prudential Lending Authority (APRA), made changes to lending laws in 2015. Leading economists are suggesting that if another rate cut occurs, then its highly likely that APRA will use a further control to slow the market if it appears that it is going to accelerate again.
Property experts are saying that while lower interest rates will not create another property price boom, prices in Sydney still have room for growth. However, due to the affordability ceiling having been reached it was likely that any price growth would be marginal compared to previous price growth in 2015.
CoreLogic RPData suggests that with affordability putting a hold on property price growth, it hasnt stopped all investors from buying. At present investors who are looking to get good returns need to be savvy. Real estate experts are indicating that it depends on whether an investor has a short-term or long-term perspective, and if theyre focused on rental returns. Those with a rental return focus should look outside of Sydney and Melbourne markets.
Canberra is said to be awakening, and Tasmania, particular Hobarts market, is beginning to pickup. However, property prices continue to fall in Perth and Darwin.
First Home Buyer bargains can be found in regional areas such as Bendigo, Ballarat and Geelong in Victoria, and on the Central Coast in Wollongong in New South Wales. Liverpool, situated about 40 kilometres from Sydneys CBD is affordable and likely to boom according to the latest data. Here an apartment is priced around $350,000 and a home at around $500,000.
The key to buying an investment property or first home is finding the right finance for you and your circumstances. Therefore, it is vital that you shop around and consider your own financial and personal needs before you sign-up for a home loan.
Want to know more about home loans? Then contact eChoice and find the right home loan for YOU today.