News - 3 Jul, 2018

Housing Loan Interest Moves Independent of RBA Despite Holding Pattern

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Australian inflation, which the Reserve Bank of Australia aims to control with monetary policy, is likely to remain low for some time. As a result, economists estimate that the official cash rate won’t move for up to 19-months. However, lenders appear to have other ideas as the housing market continues to fluctuate.

eChoice RBA Commentary for July 2018.

The cash rate stays at 1.5% as:

Inflation sits at 1.9%;

The Australian dollar sits at .74c US;

Wage growth forecasts to reach 2.20% in 2nd 2018 quarter; and

National capital housing prices continue to fall.

The Housing Loan Market

So, in terms of housing loans, what’s on the horizon for the average home buyer? Well, according to Canstar, it’s a mixed bag. Some lenders are opting to move rates up, while others have dropped theirs to increase competition and make themselves more attractive to homeowners looking for better deals.

But, here’s the kicker: Variable rates are on the rise, while fixed rates appear to be falling. Canstar estimates that in May some 24 owner-occupier variable rate loans had a rate rise, while 8 housing loan rates fell. Fixed rate loans, on the other hand, for this group, were evenly distributed with some rising and others falling.

Investor loans are a different story altogether. Canstar state that 44 variable investment loan rates shifted in May, with there being a balance between those rising and others falling. Fixed rate loans were the biggest movers though for this group, with 29 housing loans dropping in interest, and only 4 increasing.

So, for the owner-occupier or investor now may be the right time to review their current housing loan, if they haven’t done so already. The market offers excellent opportunities to save for those with higher interest rates. Of course, it’s vital that you crunch the numbers before making a move. Let’s look at recent data.

Residential Housing Loan Movements May, 2018
Owner Occupiers
Basic Variable Standard Variable 1-Year Fixed 2-Year Fixed 3-Year Fixed 5-Year Fixed
End of Month Average 4.18% 4.44% 4.05% 4.02% 4.10% 4.49%
Minimum 3.58% 3.39% 3.49% 3.65% 3.69% 3.98%
Maximum 5.49% 5.82% 5.14% 4.95% 5.05% 5.09%
Average Decrease -0.14% -0.13% 0.00% -0.29% -0.25% -0.35%
Average Increase 0.10% 0.10% 0.30% 0.10% 0.07% 0.10%

Source: Canstar 1.05.2018 to 31.05.2018 based on $400,000 housing loan, 80 LVR, principal and interest loan.

Residential Housing Loan Movements May, 2018
Basic Variable Standard Variable 1-Year Fixed 2-Year Fixed 3-Year Fixed 5-Year Fixed
End of Month Average 4.64% 4.90% 4.37% 4.32% 4.40% 4.81%
Minimum 3.79% 3.79% 3.89% 3.74% 3.89% 3.24%
Maximum 5.18% 6.38% 5.15% 5.25% 5.35% 5.60%
Average Decrease -0.18% -0.19% 0.17% -0.17% -0.27% -0.17%
Average Increase 0.15% 0.20% 0.00% 0.00% 0.10% 0.00%

Source: Canstar 1.05.2018 to 31.05.2018 based on $400,000 housing loan, 80 LVR, principal and interest loan.

Given this information, what can those looking to buy or sell a home expect from the market?

The Australian Housing Market

National market trends have reversed with regional housing markets now outperforming capital cities. Also, the unit sector has surpassed homes, and lower priced home prices are on the rise, as higher priced homes slip in value. Although, these trends aren’t consistent across the national market, as always some regions buck these trends entirely.

Nationally, according to CoreLogic RPData, dwelling values dropped by -0.1% over the month, with combined capital city values declined by -0.2%. But, in comparison, regional values rose by 0.2% over the same period.

Dwelling Values May 31, 2018
All Dwellings
City or Suburb Month Qtr. Year Total Return Median Values
Sydney -0.2% -0.9% -4.2% -1.3% $871,454
Melbourne -0.5% -1.2% 2.2% 5.2% $717,020
Brisbane 0.2% 0.2% 0.9% 5.0% $494,038
Adelaide 0.5% 0.3% 0.6% 4.9% $437,234
Perth -0.1% 0.1% -1.8% 2.0% $463,319
Hobart 0.8% 3.7% 12.7% 18.4% $430,429
Darwin -0.2% 1.3% -7.9% -2.7% $434,134
Canberra -0.1% 0.8% 2.3% 6.9% $592,954
Combined Capitals -0.2% -0.6% -1.1% 2.2% $654,710
Combined Regional 0.2% 1.0% 2.2% 7.4% $365,792
National -0.1% -0.3% -0.4% 3.2% $555,274
Combined Capitals Houses -0.2% -0.8% -1.7% 1.3% $694,797
Combined Capitals Units -0.3% -0.1% 0.9% 4.8% $574,915
Combined Regional Houses 0.2% 1.0% 2.3% 7.4% $372,205
Combined Regional Units 0.0% 0.8% 1.8% 7.1% $342,523

Source: CoreLogic RPData

Sydney and Melbourne, Australia’s most expensive housing markets, make up approximately 60 percent of the market value. So, as CoreLogic suggest, when these markets decline in value it has a considerable impact on the rest of the nation in terms of combined capital value.

Overall, those looking to invest need to observe new emerging trends when buying. Plus, they also need to look at micro markets, or those within the broader market, to find the most competitive buys.

Are you in search of a competitive home loan? If you said yes, then discuss your options with an eChoice mortgage broker. Our brokers have access to 100’s of products across a panel of multiple lenders, so we could help you find a competitive mortgage.

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