Out of cycle rate hikes sees RBA hold firm

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With more lenders increasing their rates independently, the Reserve Bank of Australia (RBA) has left the cash rate on hold at 1.5% this month.


eChoice RBA Commentary for March 2019

The official cash rate stays at 1.5% as:

  • The big four banks and other lenders increased standard variable rates by 0.12 to 0.20%;
  • National housing prices have fallen by 3.6% over the quarter;
  • Dwelling approvals have dropped; and
  • Property investment continues to decline.

On the housing front, the initiators for this move were declining home prices, a drop in dwelling approvals and a fall in investment credit growth.

Given this, economists predict the Australian economy will slow in 2019, and the RBA will elect to cut rates later in the year if there are no signs of improvement.

Rate hikes, declining home prices and dwelling buying

Since September 2018, several lenders – ANZ, the Commonwealth Bank, NAB, Westpac, ING, Virgin Money and the Bank Of Queensland (BOQ) – made rate hikes independently of the RBA’s official cash rate.

Varying from 0.12% to 0.20%, the changes to these lenders’ rates are as follows:

Rate Rises to Standard Variable Rates Since September 2018
Lender and Loan Type Initial Advertised Rate Rate Change New Advertised Rate
ANZ
Owner Occupier Principal & Interest 5.2% +0.16% 5.36%
Investor Principal & Interest 5.8% +0.16% 5.96%
Owner Occupier Interest Only 5.75% +0.16% 5.91%
Investor Interest Only 6.26% +0.16% 6.42%
Commonwealth Bank
Owner Occupier Principal & Interest 5.22% +0.15% 5.37%
Investor Principal & Interest 5.8% +0.15% 5.95%
Owner Occupier Interest Only 5.77% +0.15% 5.92%
Investor Interest Only 6.24% +0.15% 6.39%
NAB
Owner Occupier Principal & Interest 5.24% +0.12% 5.36%
Investor Principal & Interest 5.8% +0.16% 5.96%
Owner Occupier Interest Only 5.77% +0.16% 5.93%
Investor Interest Only 6.25% +0.16% 6.41%
Westpac
Owner Occupier Principal & Interest 5.24% +0.14% 5.34%
Investor Principal & Interest 5.79% +0.14% 5.93%
Owner Occupier Interest Only 5.83% +0.14% 5.97%
Investor Interest Only 6.30% +0.14% 6.44%
Virgin Money
Owner Occupier Principal & Interest 4.64% +0.20% 4.84%
Investor Principal & Interest 4.94% +0.20% 5.14%
BOQ
Owner Occupier Principal & Interest 5.70% +0.18% 5.88%
Investor Principal & Interest 6.33% +0.18% 6.51%

Sources: ANZ, Commonwealth Bank, NAB, Westpac, Virgin Money & BOQ

With rates rising, auction clearance volumes have fallen and the time taken to sell a dwelling has also increased. Financial experts suggest these occurrences happened because borrowers are tightening their belts and preparing for tighter economic times, rather than stretching their resources to cover a mortgage. As a result, property supply is outweighing demand and creating a buyer’s market.

So, what does this scenario mean for a prospective home buyer?

If you’re looking to buy a home, do the maths and make sure you’ve got your finances in order. Calculate if you can afford to repay a mortgage at 7% to 8% without putting a strain your finances, as this will meet current lending requirements.

If the maths check out, then now may be an excellent time to search for the right property as the selection is more substantial and you can negotiate on price. With fewer buyers in the market, you’re also more likely to secure a property that meets your requirements and budget.

Falling dwelling investment, rate hikes and investors

In the February Monetary Policy, the RBA reports that property investment appeared to peak in the third and fourth quarters of 2018.

They note that while some projects are still coming to fruition, others are finding it difficult to gain approval due to financial restrictions, which is resulting in project cancellations. Building approvals were also at a five year low.

Given these circumstances, the RBA predicts that property investment levels would remain high short-term, with approved projects reaching completion. But, these levels will later decline due to funding restrictions stalling new projects.

CoreLogic RPData also reports that investor lending has been declining for some time. During December 2018, investors took out $7.5 billion in housing finance, 4.8% lower than November and the lowest borrowing figure since April 2013.

Looking more carefully at CoreLogic data, some $4.9 billion of investor finance is new, while the remaining $2.6 billion is refinancing-related. This information suggests that investors are looking to secure a better deal now, before rates increase.

RBA March cash rate

How does this affect property investors?

Investment funding costs are now higher since lenders split owner-occupier and investment lending. Regulators have also restricted the number of interest-only loans and lenders have made these more expensive with higher rates.

As an investor, it’s therefore essential that you calculate what you can comfortably afford to borrow and still leave yourself with adequate cash flow. It’s also vital that you have a sound investment plan with contingencies in place, giving you a financial buffer if needed.

If you’re looking to buy property, then consider your borrowing power and ability to service a mortgage that has a higher interest rate before approaching a lender. This strategy will improve your rate of approval success and also see you avoid feeling the pinch when rates rise.

Beating rate hikes

Whether you’re looking to buy property as an owner-occupier or investor, it’s difficult to keep tabs on your home loan with lenders making independent rate hikes.

If you’re feeling financial pressure and you don’t think your budget will stretch to cover rate increases, then now may be the time to make changes to future proof your loan. An eChoice broker can help you to compare the market and review home loan features and rates to potentially find a better deal.

Compare your interest rate today.

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The Reserve Bank of Australia (RBA) has left rates at 1.5% for another month, as the Australian property market continues to fluctuate. By leaving the cash rate on hold for February, the RBA aims to strengthen the domestic economy amidst property market shifts.


eChoice RBA Commentary for February 2019

The official cash rate stays at 1.5% due to:

  • Inflation sitting at 1.8%;
  • The Australian dollar falling to .72c US;
  • Unemployment increasing to 5.1%; and
  • Sydney and Melbourne home prices continuing to fall further, reducing combined national averages.

Two of the most notable changes in the Australian property market over the last three months include a rise in auction activity and expensive property price falls.

What is the overall impact of these factors on the economy and you as a homeowner or buyer?

Australian auction culture and the cash rate

Auction activity and the cash rate are linked. In fact, each feeds the other.

This is because low-interest rates drive competition at auctions, encouraging homeowners to use the auction strategy when selling to give them an opportunity to increase their sales price and profit.

When making a profit, typically a homeowner will use this capital to reinvest by either buying another property or purchasing goods and services. This approach, in turn, contributes to the Australian economy, which is influenced by the cash rate.

Some extreme examples of auction profits include sought-after Melbourne and Sydney homes selling for twenty, fifty, and even hundreds of thousands over their reserve prices. For an owner-occupier, this sale equates to a ‘tax-free profit’, which would be difficult to replicate using any other investment strategy over the same duration.

So, what does this information mean to the average homeowner?

Current auction data

If you’re looking to sell your home and you reside in a desirable area, then auctioning your could be financially beneficial. According to CoreLogic’s Quarterly Auction Report, a significant increase in Australian capital city auction activity occurred over the December 2018 quarter.

Data reveals that some 25,894 homes went to auction in combined Australian capitals during October, November and December 2018, compared to just 20,653 over the September 2018 quarter. However, when compared to the December 2017 quarter data (32,408 homes auctioned), present numbers are considerably lower.

But, before you rush out and list your home, you also need to consider that auction clearance rates have fallen across Australia. CoreLogic data shows that over the December 2018 quarter the combined capital auction clearance rate fell by 10% to just 43.6%. In the previous quarter, the clearance rate sat at 53.6%.

City
Clearance rate
Auction volumes
Suburb with highest no. Of auctions
Highest suburb volumes
Adelaide
48.5%
1,423
Prospect
33
Brisbane
31.8%
1,642
Camp Hill
39
Canberra
46.9%
1,090
Griffith & Narrabundah
32
Melbourne
45.4%
12,372
Reservoir
216
Perth
25.0%
499
South Perth
15
Sydney
43.1%
8,828
Mosman
126

December 2018 quarter, capital auction clearance rates and volumes. Source: Core Logic RPData

Why are auction clearance rates falling?

There are many reasons why Australian auction clearance rates have dropped, and most hinge on economic policy, political outcomes, and the economy as a whole.

Firstly, while APRA, the Australian banking regulator, removed interest-only lending restrictions on January 1, 2019, it will take some time before this change has an impact on auction clearance rates or market prices.

Secondly, a federal election looms, which always creates turmoil. Lastly, the banking sector final report from the Hayne Royal Commission could increase risk. These three factors are impacting dwelling prices, especially those at the higher end of the market.

Australia’s most expensive property prices tumble

Over the last twelve months, home prices across Australia dropped by 4.8%. But when this data gets divided into property value tiers, the greatest drop in home price is found in the highest tier – Australia’s most expensive property, valued at over $1.1 million.

RBA February cash rate

This tier recorded falls of 9.6% during 2018, whereas property in the lowest tier – homes valued at under $262,000 – recorded a price increase of 0.9% over the same period.

Based on this information, economists suggest that the Australian housing market is strongest in the most affordable tiers. Further driving this market’s strength is first home buyer activity and lending constraints in the high tiers.

How to make the most of the low cash rate and falling property prices

Low-interest rates make buying a home more affordable, as do falling property prices. So, if you’re looking to buy or build a new property and you have your finances in order, then now could represent the perfect opportunity.

If you’re a first home buyer, consider government grants and how much you’ll need to save for a deposit. You should also review your borrowing capacity and consider paying off any outstanding debts to increase your capacity further.

Of course, if you’re unsure, then ask for help. Often a mortgage broker can answer all your questions, and they can help you to work out your borrowing capacity, government grants and other pressing issues.

Overall, if you’re interested in selling your home or buying a new property, it’s crucial to conduct thorough market research before making any move. Don’t fall into the trap of selling below your asking price or reserve or making a purchase above market value at a private treaty or an auction because you let your heart rule your decision. Instead, keep a level head and know what numbers you need to make buying or selling a property a reality.

Thinking of cashing in on the buyers’ market while rates remain low? Now may be the time to discuss your options with an eChoice mortgage broker. We have access to hundreds of products across a panel of multiple lenders, so we can help you find a competitive mortgage.

Compare your interest rate today.

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The Reserve Bank continues to strengthen the Australian economy by leaving the cash rate on hold at 1.5%, with home prices falling as lending reforms restrict investor activity. This lull in market action is encouraging younger generations to start buying property, especially with many homes selling below their listed prices.


eChoice RBA Commentary for December 2018

The Australian cash rate remains steady at 1.5% as:

  • Inflation sits at 1.9%;
  • The Australian dollar rises to around .73c US;
  • Unemployment dropped to 5.0%; and
  • Dwelling prices continue to fall nationally.

Home buying and interest rates

The official cash rate last moved in August 2016, when the Reserve Bank of Australia (RBA) dropped the cash rate by 0.25% to 1.5%. However, looking to keep the Australian economy steady as global economies continue to expand, the RBA indicates that no rate rise is likely for some time.

Why?

Revision to the economic forecast is likely for 2019 and 2020. Over the past year, the GDP has risen by 3.4%, and unemployment has declined to 5% – its lowest in six years. Given this, forecasts suggest that the GDP will sit at 3.5% over the next 18 months, before declining in 2020, due to a drop in resource exports.

Australian trade has increased over the last two years while the Australian dollar has stayed within its expected range. As a result, inflation hovers around 1.9% and is expected to rise to 2.25% during 2019.

While business conditions remain positive and higher infrastructure levels are supporting economic growth, household consumption stays low. This scenario is likely to persist for some time, given that household debt is high and asset prices are steadily declining.

Furthermore, market conditions in Sydney and Melbourne are softening, rent inflation remains low and owner-occupier and investor credit growth has declined noticeably.

What’s the bottom line? Tighter credit conditions and incredibly low-interest rates are increasing lender competition, which, in turn, is encouraging younger borrowers to enter the market.

Millennials and home buying

According to data, millennials (Australians aged 25 to 34 years) are saving more for a home than they are for a holiday and, on average, 70% of the savings of those aged 25 to 34 is earmarked for a home deposit. Research indicates that millennial home loans surged over the last two months, with mortgages amongst this demographic increasing during 2018.

In today’s market, to save enough to buy an averagely-priced dwelling in Australia you’ll need at least $100,000. To encourage younger generations to save for a home, some lenders are launching savings accounts that attract ‘bonus’ interest. So, for anyone looking to save a home deposit faster, it’s worth researching the market before setting up a savings account.

RBA cash rate remains steady

Smart home buying as property prices fall

CoreLogic Data recently reviewed advertised home prices and selling prices to see if homes were selling at their listed prices. The results of the review indicated that, over the last three months to October 2018, over 75% of Australian homes sold for less than their advertised price.

As lending criteria continue to tighten and the ‘fear of missing out’ on purchasing property dwindles, home stock increases. This scenario is seeing home buying negotiations becoming more prevalent, with buyers offering lower prices and vendors willing to accept these offers.

Home buying discounting is as high as 7.3% in some areas: at these rates, a home listed for $850,000 could end up selling for $722,499.

Dwelling values across Australia have fallen by as much as 3.5% over the last 12 months, making home buying far more affordable. This market correction is expected to continue for some time, making it a favourable time to buy property.

The Australian home buying market

CoreLogic_RP-Data_Logo

CoreLogic RPData stresses that homes values across Australia are falling due to tighter lending conditions. Nationally, the price drop in dwellings is the sharpest decline since February 2012, but to put this into perspective, market increases across Australia have risen by some 44% in the last decade.

Over the last 12 months, Sydney home values fell by 7.4% and Melbourne dwelling values by 4.7% over the same duration. With these markets being some of the most sought-after in Australia, this is great news for first home buyers looking to break into the market.

Dwelling Values October 31, 2018
All Dwellings
City Month Quarter Year Total Return Median Values
Sydney -0.7% -2.0% -7.4% -4.2% $833,876
Melbourne -0.7% -2.1% -4.7% -1.4% $665,044
Brisbane 0.0% 0.0% 0.4% 4.2% $491,925
Adelaide 0.2% 0.2% 1.8% 6.3% $431,554
Perth -0.8% -2.0% -3.3% 0.5% $451,148
Hobart 0.9% 1.2% 9.7% 15.2% $445,655
Darwin 0.0% -0.7% -2.9% 2.5% $433,818
Canberra 0.0% 1.5% 4.3% 9.0% $589,415
Combined Capitals -0.6% -1.6% -4.6% -1.2% $625,215
Combined Regional -0.2% -0.7% 0.8% 5.9% $375,444
National -0.5% -1.4% -3.5% 0.2% $538,688

Source: CoreLogic RPData

Economists suggest this is only the start of the housing market slump, given we’ve seen such high price rises over the last four years. Tighter lending conditions are expected to put an even heftier brake on market activity, with home values predicted to drop by as much as 12% in 2022.

Those thinking of buying a home, or those already saving a deposit, can take advantage of this slump. By potentially saving more now, you can buy property while prices and interest rates are at their lowest, which means you could save more long-term.

If you’re looking to cash in on the buyers’ market while rates remain low, then it’s time to discuss your options with an eChoice mortgage broker. We have access to hundreds of products across a panel of multiple lenders, so we can help you find a competitive mortgage.

Compare your interest rate today.

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Aiming to build a stronger Australian economy the Reserve Bank of Australia (RBA) has left rates on hold for another month. As a result, low-interest rates continue to encourage new home buying trends to emerge. One such trend is the growth of sustainable high-density living amidst a booming population.


eChoice RBA Commentary for November 2018.

The Australian cash rate remains unchanged at 1.5% as:

• Underlying inflation site below the 2.5% target;

• The Australian dollar drops to under .71c US;

• Unemployment fell to 5.3%; and

• Capital city dwelling prices continue to adjust.

Australia’s Booming Population and High-Density Living

Research suggests that Australia is growing, and fast. Over 10-years, between 2006 and 2016 Sydney added 800,000 people to its population, and Melbourne 1 million. Brisbane and Perth grew by almost 500,000 each over the same time.

But here’s the kicker: Australian housing, along with infrastructure such as amenities and transport, as well as roads are struggling to keep up. This bulge in population has taken the Australian government by surprise. After all, it was estimated the Australian population would reach 25 million by 2050. But, we’re already there.

This dilemma has resulted in the need to introduce more high-density living. In 2015, Australia passed an important milestone. This year was the first in our nation’s history where attached property dwelling construction overtook detached housing.

According to the Australian Bureau of Statistics (ABS), since 1991 apartments, flats and units, classified as high-density living, increased by 78% to over 1.2 million dwellings in the 2016 Census. Consequently, resulting in one apartment per every 5 homes.

Over the last two years, between 2016 and 2018, it’s estimated that more than 247,000 high-density dwellings reached completion. Another 155,275 are under construction.


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Average loan amount
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Average annual salary
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The Affordability of High-Density Living

Population data suggests that the most densely populated area in Australia is now Melbourne. Some 45,231 people reside in a 2.4 square kilometre (sqkm) area, which equates to a density of 19,100 people per sqkm. However, apartment values in the area are still relatively low with a median of $444,000.

In 2001 though, Melbourne ranked as the 114th high-density region in Australia. In fact, data suggests that back in 2001 Sydney suburbs were listed in the top 12 highest populated areas. Median values in these areas range from $880,000 up to $1 million.

Today, the most affordable high-density living is found in Melbourne, Brisbane, Adelaide, Perth and Hobart. Median values in these areas range between $250,000 and $444,000.

As always though, when looking to buy property it’s important that you research the market. Also, consider your own financial and personal circumstances before applying for a loan. By borrowing slightly less, you’ll give yourself a financial buffer allowing you to have funds for any unexpected expenses should they arise.

Australian High-Density Living Benefits

Why buy a small home? Well, according to property experts there are many benefits. Firstly, the entry cost is far lower because the dwelling size and land that surrounds it is far more compact. Secondly, it gives home buyers an opportunity to declutter and live a minimalist lifestyle.

This is crazy: but other high-density living advantages include better heart health as studies have found that high-density living encourages physical activity, which can reduce heart disease. Many apartment complexes also come with amenities as a part of the corporate fee. These often include a gym, swimming pool and sauna, as well as a communal garden.

High-density living can reduce living costs, with less power usage, maintenance and government charges. Plus, apartment dwellers can often get rid of that costly vehicle, which attracts fuel, insurance, registration and upkeep costs.

The Australian Housing Market Big Picture

CoreLogic_RP-Data_Logo

According to CoreLogic RPData, since peaking in September 2017, Australian housing market values have fallen by 2.7%. Nationally, dwelling values fell by 0.5%, with 5 out of 8 capital cities dropping in value.

Over the last 12-months, Darwin and Perth dwelling values have declined by 22.1% and 13.2% respectively. Sydney and Melbourne, on the other hand, have dropped by 6.1% and 3.4% respectively. Of course, Sydney and Melbourne make up around 60% of the housing market, so changes in these cities have a profound effect on the national housing market.

Dwelling Values September 31, 2018
All Dwellings
City or Suburb Month Qtr. Year Total Return Median Values
Sydney -0.6% -1.5% -6.1% -3.2% $847,948
Melbourne -0.9% -2.4% -3.4% -0.5% $697,457
Brisbane 0.2% 0.1% 0.8% 4.9% $495,474
Adelaide -0.2% 0.0% 0.7% 4.9% $438,570
Perth -0.6% -2.0% -2.8% 1.0% $452,138
Hobart 0.4% 0.3% 9.3% 14.7% $443,711
Darwin -0.4% 0.1% -3.7% 1.8% $436,936
Canberra 0.3% 1.0% 2.0% 6.6% $598,326
Combined Capitals -0.6% -1.5% -3.7% -0.6% $642,531
Combined Regional -0.2% -0.9% 1.2% 6.2% $368,441
National -0.5% -1.4% -2.7% 0.7% $550,610

Source: CoreLogic RPData

Housing market forecasts suggest that property prices in Sydney and Melbourne will continue to fall over the next 12-months. Dwelling values in Adelaide, Brisbane, Canberra and Hobart, however, will continue to increase.

Housing prices are dropping, interest rates are low, and the market is in a period of correction. Saving for a deposit now, if you haven’t already, could enable you to break into the market before the cycle changes.

If you’re concerned about buying an off-the-plan property, then consider looking at high-density living that is nearing completion or is finished. This approach will reassure you that you’re buying a property that’s worth market value.

If you’re looking to beat a rate rise by securing a more competitive home loan, then it’s time to discuss your options with an eChoice mortgage broker. We have access to 100’s of products across a panel of multiple lenders, so we can help you find a competitive mortgage.

Compare your interest rate today.

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Nationally housing affordability is growing due to Australian median home prices falling further and marginal growth in wages. This rise in affordability also coincides with the Reserve Bank of Australia’s latest decision to leave the official cash rate on hold at 1.5% for another month.


eChoice RBA Commentary for October 2018.

The Australian cash rate remains unchanged at 1.5% as:

• Inflation remains at lower than required targets;

• The Australian dollar sits at .72c US;

• Household consumption increased by 0.4% to GDP;

• Unemployment fell to 5.3% – the lowest rate since the 2012 mining boom; and

• National housing prices continue to adjust.

What’s the bottom line? Well, with the Australian housing market worth $7.3 trillion it makes up a sizeable portion of the Australian economy. Of this market, Sydney and Melbourne make up 60% of the market share. So, price fluctuations in these cities have a considerable impact on what happens across the market nationally, which, in turn, affects the Australian economy and consumer confidence. Consequently, these markets influence RBA rate settings, and the outlook for economic growth.

For instance, when the Sydney property market boomed, and the median home value hit $1 million in mid-2015 due to low interest rates and investors buying up housing stock, the Reserve Bank issued warnings over rising household debt concerns. Shortly after that, the Australian Prudential Regulation Authority (APRA), a government body that promotes financial stability, introduced regulatory changes to lending that restricted investor borrowing to prevent household debt becoming difficult to manage.

But, here’s the kicker: Regulatory changes led to the booming Australian property market slowing down. Investors, which made up over 55% of the market share in 2015 have now dropped to approximately 41%. Since peaking in 2017, Sydney home values have fallen by 5.6%. However, values in this city during the GFC fell by 7%, and by 7.1% during the 2003-2006 downturn.

So, how does this relate to housing affordability?


Unlock your suburb's demographic profile

I am a
living in .

I am looking to buy a property
in .

Looking to buy in Ultimo, NSW 2007.

Roof
Average property price
$1,000,000
Average loan amount
$800,000
Average annual salary
$60,000
Average credit card limit
$2,400
house foundation

This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.

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Lookup another suburb >


Australian Housing Affordability

CoreLogic_RP-Data_Logo

According to CoreLogic RP Data, the national housing affordability ratio, based on household income to dwelling prices, fell to 6.81 during the June quarter, from a high of 6.84 in the March quarter.

The rise in housing affordability links directly to a slight increase in household income, and the fact that home values are falling. CoreLogic report that household incomes in Australia rose by 0.3% between the March and June quarters, while home values over this time slipped 0.2% nationally based on median values.

It gets better though, according to data housing affordability fluctuates, as do home values, depending on location. For example, property in Leonora, Western Australia has a median value of $45,000, with the median household income reaching $57,000 per annum. Thus, this region’s housing affordability ratio is just 0.69, which means that it takes 0.69 times the national median wage to buy a home in this region. On the other hand, a home in Vaucluse, Sydney, has an affordability ratio of 20.

Given this information, what are the median values of Australian capitals at present?

Australian Housing Performance Over The Last Month

Still in a phase of correction the Australian housing market, according to CoreLogic RPData, has declined by a marginal 2.7% since it’s peak in September 2017. Nationally, dwelling values dropped by 0.5% since August 30th, with five of eight capital cities recording lower values. This data, says CoreLogic, is slower than previous declines such as the market downturn that occurred between Jun 2010 to Feb 2012 where dwelling values nationally fell by 3.0% in the first 12-months – from the height of the peak through to the bottom of the decline the market dropped by 6.5%.

Compared to peak values recorded in 2014, Darwin and Perth are the hardest hit cities recording 22.1% and 13.2% consecutively. The cities that are having the greatest impact on national dwelling values though are Sydney and Melbourne, which account for over half of the national market.

Adelaide, Canberra and Hobart are realising gains. However, these gains are substantially less than 12-months ago. Gains in Adelaide 12-months ago were around 5.0%, but these have slowed to 0.7%, Canberra gains have slowed from 7.8% to 2.0%, and Hobart’s gains were 14.3% but have declined to 9.3%.

Dwelling Values September 31, 2018
All Dwellings
City or Suburb Month Qtr. Year Total Return Median Values
Sydney -0.6% -1.5% -6.1% -3.2% $847,948
Melbourne -0.9% -2.4% -3.4% -0.5% $697,457
Brisbane 0.2% 0.1% 0.8% 4.9% $495,474
Adelaide -0.2% 0.0% 0.7% 4.9% $438,570
Perth -0.6% -2.0% -2.8% 1.0% $452,138
Hobart 0.4% 0.3% 9.3% 14.7% $443,711
Darwin -0.4% 0.1% -3.7% 1.8% $436,936
Canberra 0.3% 1.0% 2.0% 6.6% $598,326
Combined Capitals -0.6% -1.5% -3.7% -0.6% $642,531
Combined Regional -0.2% -0.9% 1.2% 6.2% $368,441
National -0.5% -1.4% -2.7% 0.7% $550,610

Source: CoreLogic RPData

Want to know the best part? According to CoreLogic Data, the lower level of the markets – homes of lesser values – are performing better. This trend is due to a surge in first home buyer numbers and broader housing affordability constraints lifting.

The major contributor to the market slowdown is the tightening of lending regulation where client interests are a priority, along with reducing lending risk. As such, this approach has impacted on credit availability, with investor credit now reportedly growing at its slowest pace in 5-years.

Investors, however, still account for 41% of the Australian housing market despite higher mortgage rates, stricter lending criteria, and lower rental yields. Although, housing demand continues to grow along with the health of the Australian economy, and home loan rates are estimated to stay low until 2020.

If you are looking to beat a rate rise by securing a more competitive home loan, then it’s time to discuss your options with an eChoice mortgage broker. We have access to 100’s of products across a panel of multiple lenders, so we can help you find a competitive mortgage.

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Looking to keep the Australian economy steady and moving in an upward trend, the Reserve Bank has left the official cash rate on hold for yet another month. However, lender rate rises have begun, with lenders making a move to independently raise rates to negate their rising costs.


eChoice RBA Commentary for September 2018.

The Australian cash rate remains unchanged at 1.5% as:

• Underlying inflation is below targets at 2.0%;

• The Australian dollar drops to .72c US;

• Household consumption increased by 0.3%;

• Unemployment fell to 5.4%; and

• Capital city dwelling prices continue to adjust.

Here’s the deal: Given this move by lenders, economists predict that the RBA won’t make changes to the official cash rate anytime soon. Plus, these financial commentators suggest that if lenders continue to make independent rises, then the RBA may be forced to drop rates to stimulate the economy and consumer spending.

So, what’s this independent move mean for Australian homeowners?

Australian Home Loans & Lender Rate Rises

With economists warning that out-of-cycle rate rises are going to be a common occurrence, mortgage holders must prepare for financial changes in the future. Those who have variable rates and have stretched their borrowing capacity to its maximum potential should consider their options. Otherwise, they may be facing higher mortgage repayments.

For instance, smaller Australian lenders were the first to make independent rate rises back in June 2018. These lenders shifted their variable rates on principal and interest owner-occupier loans up by 10 basis points. At the same time, interest only owner-occupier loans and interest-only investor loans also rose up by 15 basis points. Then in the closing months of September, one of the big four banks announced that it too would independently raise its variable rates by .14 basis points.

What’s the bottom line? Well, for an Australian family with a $300,000 home loan, this lender move will add an extra $35 to their interest repayment monthly. Now, while this doesn’t sound like a lot, over a year this is $420. Plus, many Australians have far larger mortgages than $300,000.

But, it gets worse: This move by banks is expected to put Australian households under greater financial stress, especially when the debt-to-income ratio nationally sits at 200%. Australian borrowers will also find it harder to obtain a loan with it estimated that four in 10 home loan applications, including those refinancing, are rejected due to stricter lending conditions.

Now, you might be wondering: Why are lender rate rises occurring out-of-cycle?

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The Cause of  Australian Lender Rate Rises

According to economists, Australian lenders are finding it difficult to maintain their current interest rates due to rising bank bill swap rates. Now for those who don’t know, bank bill swap rates are the short-term interest rate that benchmarks Australian dollar securities pricing. The RBA suggests that around 20% of bank funding is short-term derived and that the banks can no longer absorb these rising short-term costs as they have down in the past.

But here’s the kicker: Residential loans typically account for over 50% of a lenders total loan portfolio.  Thus, the sheer size of the portfolio means that the rising costs are affecting their profit margins.

How Australian Home Owners Can Combat Lender Rate Rises

Rather than preparing for battle, many economists suggest that borrowers seek to combat rate rise now by looking at their options. Why? Well, interest rates are still at record lows, and borrowers who consider fixing can even lock-in rates for under 5%.

This is crazy: Mortgage comparison sites indicate that the average 3-year fixed loan is just above 4%, while the average variable rate is closer to 5%. Many lenders have also adjusted their fixed rates, with reductions to make themselves more competitive in the market.

But, most borrowers with variable rates, also have a ’set and forget’ mindset when it comes to their home loan. Unfortunately, this can lead to higher mortgage stress later, especially as home values continue to adjust nationally.

How Is Australian Housing Performing?

CoreLogic_RP-Data_Logo

The Australian housing market, according to recent CoreLogic RP Data, is currently estimated to be worth $7.6 trillion, with the number of dwellings sitting around 10 million. The value of outstanding home loan debt hovers at $1.77 trillion, with household wealth estimated to be at 52.2%.

Nationally, dwelling values have fallen 2.2%, since peaking in September of 2017. Weaker housing conditions are attributed to tighter lending restrictions, especially in investment terms, and reduced market competition.

Dwelling Values August 31, 2018
All Dwellings
City or Suburb Month Qtr. Year Total Return Median Values
Sydney -0.3% -1.2% -5.6% -2.7% $855,287
Melbourne -0.6% -2.0% -1.7% 1.2% $703,183
Brisbane -0.2% 0.1% 0.9% 5.0% $493,922
Adelaide 0.3% 0.5% 1.0% 5.2% $438,466
Perth -0.6% -1.9% -2.1% 1.8% $454,007
Hobart -0.1% 0.1% 10.7% 16.2% $437,254
Darwin 0.1% -0.7% -4.0% 1.5% $439,718
Canberra 0.5% 0.4% 2.3% 6.9% $593,886
Combined Capitals -0.4% -1.2% -2.9% 0.3% $646,020
Combined Regional -0.2% -0.6% 1.6% 6.6% $368,336
National -0.3% -1.1% -2.0% 1.5% $552,141

Source: CoreLogic RPData

Want to know the best part? As a borrower, you can consider your options, rather than waiting for rate hikes. So, if you have a home loan, then now is the time to start looking at its affordability. You can do this by using a mortgage calculator to work out your repayments if your rate rises by 0.5%, by 1%, and even by 2%. If making repayments at these higher rates are going to be a struggle, then seek out an alternative that will make your home loan more affordable.

Are you looking to beat a rate rise by securing a more competitive home loan? If you said YES, then it’s time to 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 can help you find a competitive mortgage.

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The Reserve Bank of Australia (RBA) has left rates on hold at 1.5% yet again for August 2018. In fact, it’s been almost 2-years since the RBA have moved on the official cash rate. Though, economists predict that rate hikes may occur in the closing months of 2019, providing that inflation warrants the move. So, the question on many people’s lips is, “How will Australian home values handle a rate rise?”


eChoice RBA Commentary for August 2018.

The cash rate stays at 1.5% as:

• Inflation sits at 2.1%;

• The Australian dollar holds at .74c US;

• Household consumption increases to 3%; and

• Capital city house value nationally continues to decline.

Australian Home Values

Australian home values have continued to fall since September 2017, according to CoreLogic Data, with property now 1.3% lower than their peak. Although, these declines are small when compared to the spike in home values during peak times. Even with the decline in home prices, the Australian housing market is still 32.4% higher in value than 5-years-ago.

A growth of over 30% in 5-years is far greater than any other return, and it signifies the level of wealth creation experienced by many nationally. But, for those who have only recently bought property, the decline in property values may mean that they now have little or no equity in their home and that they have lost investment value short term.

In relation to home value, CoreLogic’s June quarter results show that dwelling prices nationally fell by 0.8% over the quarter. The largest declines over the quarter occurred in Melbourne with a drop of -1.4% in value, Sydney followed with a decline of -0.9%, then Darwin at -0.8% and Perth with -0.7%.

However, not all Australian homes fell in value. Hobart homes rose in value by 2.3% over the quarter, and Adelaide property increased by 0.9%, followed by Brisbane with a 0.3% increase and Canberra with 0.2%.

Dwelling Values July 31, 2018
All Dwellings
City or Suburb Month Qtr. Year Total Return Median Values
Sydney -0.3% -0.9% -4.5% -1.6% $870,554
Melbourne -0.4% -1.4% 1.0% 3.9% $716,774
Brisbane 0.2% 0.3% 1.1% 5.1% $495,242
Adelaide 0.3% 0.9% 1.1% 5.3% $439,215
Perth -0.5% -0.7% -2.1% 1.9% $461,149
Hobart 0.3% 2.3% 12.7% 18.3% $436,899
Darwin -1.1% -0.8% -7.7% -2.4% $433,309
Canberra -0.3% 0.2% 2.3% 6.9% $587,867
Combined Capitals -0.3% -0.8% -1.6% 1.6% $654,366
Combined Regional 0.0% 0.6% 2.2% 7.3% $367,135
National -0.2% -0.5% -0.8% 2.7% $556,384

Source: CoreLogic RPData


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The RBA and Australian Home Values

Reserve bank of Australia

The RBA’s role is to offer stability to the Australian currency, to maintain levels of full-time employment and to encourage economic prosperity for Australian people. To ensure these occur, the RBA’s policies centre around a medium-term inflation target of 2 to 3%. This level of inflation is often a precondition for the promotion of a sustainable economy and also employment.

However, the Reserve does not guarantee solvency for financial institutions. Also, the Bank does not provide support for insolvent institutions. Instead, the Reserve provides liquidity to the system and also manages financial predicaments.

Australian home values are pivotal to the management of the Australian economy as they link directly to household finance and the maintenance of family financial stability. With Australian debt levels escalating, the Reserve and other financial regulators have worked closely to mitigate the risk that has risen from the level of household borrowing.

To maintain financial stability, the Australian Prudential Regulation Authority (APRA), which works closely with the RBA, introduced tighter lending conditions. This action saw fewer investors buying, which, in turn, resulted in the prices of homes across Australia falling. This fall is despite APRA lifting its 10% speed limit for lenders mid-year in 2018.

But, even though APRA’s investor growth limitations have worked, allowing the RBA to keep rates low and a housing boom contained, this doesn’t mean that rates won’t independently rise. In fact, there’s talk that lenders will have no choice but to raise rates to maintain control over escalating costs.

What’s On the Lending Radar?

Lenders typically borrow their money off-shore from countries such as the US and Canada. So, when these countries raise their rates, which they’ve recently done, then the cost to borrow funds short-term will increase.

But, here’s the kicker: these short-term funding costs are around GFC levels. Now, when you also consider that investor finance has fallen by almost $2.3bn a month, the lowest in approximately five years, then it’s highly likely that lenders will need to recoup costs.

However, the likelihood that lenders would raise rates significantly is low. Why? Well, according to survey data, the high level of Australian household debt is majoritively owned by higher-income middle-aged people, with stable incomes and financial buffers in place, and also lower-income households, with greater debt than income. Although, households assets are said to be, on average, around five times the value of household debt, with assets exceeding the value of debt for the majority of households. But, most of these assets are difficult to liquify due to them being either property or superannuation.

So, what’s the bottom line? The RBA suggest that households with greater debt levels are more susceptible to economic shock, and, this, in turn, may affect economic outcomes resulting in less consumption. Plus, the RBA has noted that rises in rates reduces the disposable income of households, with households then less inclined to borrow, which will also affect Australian housing values with supply outweighing demand. Given these outcomes, the RBA will be closely monitoring household financial balance.

Are you looking to beat a rate rise by securing a more competitive home loan? If you said YES, then it’s time to 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 can help you find a competitive mortgage.

Compare your interest rate today.

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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
Investors
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.


Looking to keep financial stability under wraps, the Reserve Bank of Australia (RBA) has left the official cash rate on hold at 1.5% for the 22nd consecutive month. This move, says the RBA, allows both businesses and households to continue building their financial backing so that they can prepare for expected rate rises in 2019.


eChoice RBA Commentary for June 2018.

The official cash rate remains at 1.5% as:

• Inflation sits at 1.9%;

• The Australian dollar sits at .75c US;

• Wage growth rose 0.5% in March 2018 quarter; and

• National housing prices fall.

So, based on this information, what’s the bottom line?  Well, economists say Australian inflation is still low, along with wage growth. Unemployment, on the other hand, hovers around 5.5% and economic growth is sluggish. However, the RBA won’t cut rates to stimulate growth and consumer confidence because it fears that this move will overinflate house prices, and further increase household debt. Instead, the RBA will hold tight and hope that the good times are on the horizon, just as they are predicting.

But, here’s the kicker: the Reserve Bank doesn’t blame current house price trends and household debt levels on higher borrowing. But, it does point the finger at a lack of housing stock, which economists suggest is the correct analogy. Why? As the adage says, “When supply exceeds demand, then demand will rise.” When demand rises, then so too do prices.

Current Housing Demand in Australia

The property market crystal ball, over the next 3-years, predicts that the official cash rate will rise to 1.75% and housing affordability will drop to 31.2%. The Australian population will also grow by 1.6% to almost 25.5 million, based on current Australian Bureau of Statistics (ABS) data.

On a capital city basis, the population will increase by 5% in Adelaide, 14.3% in Hobart, 7.8% in Canberra, 10.5% in Sydney, and 12.1% in Melbourne. Brisbane will see marginal growth under 3%, and Darwin and Perth will decline in population due to mining industry shifts.

So, what’s this data mean for Australian property investors? Let’s look at house prices to get an indication.

House Prices Across the Nation

CoreLogic_RP-Data_Logo

CoreLogic RP Data suggest that national dwelling values fell by 0.1% in April, the seventh monthly drop since October 2017, when dwelling prices started to decline. However, these drops still seem to be predominately associated with the larger Australian capitals such as Sydney and Melbourne. House prices in other capitals – Adelaide, Darwin, Canberra and Hobart – have risen in value.

Dwelling Values as of 30th April 2018
All Dwellings % Change
City or Suburb Month Qtr. Annual Total Return Median Values
Sydney -0.4% -1.2% -3.4% -0.4% $875,816
Melbourne -0.4% -0.7% 3.7% 6.7% $720,433
Brisbane -0.1% -0.1% 0.9% 4.9% $492,911
Adelaide 0.1% -0.2% 0.8% 5.1% $435,042
Perth 0.0% 0.1% -2.3% 1.6% $464,238
Hobart 1.2% 3.6% 12.7% 18.4% $430,138
Darwin 0.6% 0.7% -7.7% -2.5% $433,609
Canberra 0.6% 0.5% 2.6% 7.2% $594,486
Combined Capitals -0.3% -0.7% -0.3% 3.0% $655,419
Combined Regional 0.4% 1.3% 2.4% 7.7% $364,706
National -0.1% -0.3% 0.2% 3.9% $554,605

Source: CoreLogic RPData

Unit values, according to economists, are outperforming houses prices. Capital city unit values have risen by 5.5% per annum, despite the high level of construction.

Unit Values as of 30th April 2018
Units % Change
City or Suburb Month Qtr. Annual Total Return Median Values
Sydney 0.1% 0.2% 0.1% 4.7% $753,304
Melbourne 0.2% 0.3% 5.7% 9.8% $574,003
Brisbane 0.6% 0.0% -0.6% 4.4% $384,970
Adelaide -0.3% -0.1% -0.7% 4.3% $328,274
Perth 0.0% -1.4% -2.3% 1.2% $400,717
Hobart -0.3% 3.1% 8.2% 13.8% $353,292
Darwin -1.1% -4.1% -11.0% -5.7% $334,436
Canberra 0.4% -0.1% 0.5% 5.9% $435,072
Combined Capitals 0.1% 0.1% 1.9% 5.9% $575,191
Combined Regional 0.3% 1.4% 2.4% 7.8% $341,645
National 0.2% 0.3% 2.0% 6.2% $515,610

Source: CoreLogic RPData

House Values as of 30th April 2018
Houses % Change
City or Suburb Month Qtr. Annaul Total Return Median Values
Sydney -0.6% -1.9% -5.2% -2.5% $1,026,638
Melbourne -0.6% -1.1% 3.1% 5.7% $824,955
Brisbane -0.2% -0.1% 1.2% 5.0% $535,292
Adelaide 0.1% -0.2% 1.0% 5.2% $462,049
Perth 0.0% 0.4% -2.3% 1.7% $487,992
Hobart 1.5% 3.7% 13.6% 19.3% $452,935
Darwin 1.4% 3.2% -6.1% -0.9% $496,498
Canberra 0.7% 0.7% 3.3% 7.6% $678,766
Combined Capitals -0.4% -1.0% -1.0% 2.0% $694,944
Combined Regional 0.5% 1.2% 2.4% 7.7% $371,226
National -0.2% -0.5% -0.3% 3.2% $571,441

Source: CoreLogic RPData

Furthermore, owner-occupier lending has increased, while investment borrowing has declined. New South Wales, according to CoreLogic, also had an 8.1% surge over the 12-months to March 2018 in first home buyer activity.

Overall, lower mortgage rates are expected to encourage further housing demand, along with increased levels of overseas migration to Australia. Plus, the RBA predicts that the official cash rate will remain on hold for the rest of 2018 and half of 2019. This news is encouraging for investors and means those who have buffers in place will fair well, with marginal rate rises to cover.

Are you in search of a lower interest rate on your mortgage? If you said yes, then discuss your options with an eChoice mortgage broker. With access to 100’s of home loan products, we can help you find a competitive home loan rate.

Compare your interest rate today.

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