15 Dec December 2018
Welcome to our December Newsletter
With Christmas just days away, we’d like to send our very best wishes to you and your family for a happy and safe holiday season.
What a year it’s been! It was great to see many of our first-home buyer customers finally getting their foot on the property ladder, as homes became a bit more affordable. There were plenty of bargains for property investors, despite the tightening in credit conditions, and those still in the market to buy a home in December will be ending the year on a high note. Property prices and auction clearance rates continue to weaken, creating a buyer’s market with plenty of property still up for sale.
Interest Rate News
At its last meeting for 2018, the RBA kept the official cash rate on hold at 1.5% for the 27th meeting in a row. They will not reconvene until February, so rates look set to remain stable well into the New Year. Forecasters are predicting it will be some time before there will be any change in rates, so it’s looking good for home-owners in 2019.
Property Market News
Average home values are down by 5.6% year-on-year (YOY) across the nation. Sydney has shown the largest home value decline of -8.06% YOY, with a fall of -1.43% in November. Melbourne saw a fall of -5.80% YOY and a decline of -0.97% in November. Perth also saw a YOY decline in home values of -4.19% although prices only fell by -0.74% in November. Darwin also saw a slight decline YOY of -0.78 but home values appreciated in November by +0.71%.
Other capital cities fared better this year. Brisbane/Gold Coast saw a marginal increase YOY of +0.19% and only saw a slight decline in home values of -0.02% in November. Canberra enjoyed a considerable increase in home values of 4.04% YOY and an increase of +0.63% in November. Adelaide saw an increase of 1.42% YOY and an increase of +0.06% in November. However, Hobart was the standout performer in 2018 with home values increasing +9.34% YOY and +0.70% in November.
Whilst the number of properties on the market and up for auction looks very healthy for this time of year, clearance rates continue to fall. For the last week of November, there were 1514 auctions in Victoria with a clearance rate of 46%, 1116 auctions in NSW with a clearance rate of 49%, 286 auctions in QLD with a clearance rate of 37%, 154 auctions in SA with a clearance rate of just 42% and 105 auctions in the ACT with a clearance rate of just 50%. WA held just 57 auctions with a clearance rate of 40% and Tasmania held only 7 auctions and all properties sold.
Are you in the market to buy a home?
There’s an unusually large number of houses up for sale this December. Clearance rates are tracking lower and private sales are showing substantially longer selling times. This suggests vendors may be willing to lower prices before the property market slows down even further, as is usual during the summer months. If you’ve been thinking about buying a home, read our article about why the holidays may be a good time to buy – and see us about getting pre-approval on your home loan so you’re in a good position to negotiate your price.
5 common mistakes of first home buyers
Getting ready to buy your first home? As your mortgage broker, we’re here to help you every step of the way. It’s an exciting time and it’s easy to make mistakes. Here are 5 common mistakes that you should try to avoid!
1. Relying on advice from family and friends
Family and friends are people you can trust, so it’s understandable that you listen to their advice. However, while they may have the best of intentions, it’s always best to seek independent professional advice when buying a property. Things may have changed a lot since your mum and dad purchased their first home, and your circumstances are likely to be different. They may also have made mistakes without even realising it.
As a first-time buyer, you’ll want a team of experienced professionals in your corner. That means a reputable mortgage broker (like me), a solicitor or conveyancer, plus a building and pest inspector. A good accountant can also be invaluable, particularly if you are self-employed. If you need recommendations, please let me know and I’ll give you a referral.
2. Blowing the budget
The last thing you want is home loan repayments you can’t really afford – you might end up eating baked beans for years to come! That’s why it’s so important to have a solid grasp of your financial situation and budget.
As your mortgage broker, I can help you understand your borrowing power and create a home-buying budget. That will help save time when you start looking for your dream home. I’ll also organise pre-approval on your home loan, so that your finance is ready to go.
3. Underestimating the costs involved
Many first home buyers don’t understand the full costs involved in buying a property. There’s a lot to consider – your deposit, stamp duty, lender fees and charges, solicitors fees, and so on.
Then there are the ongoing costs associated with home ownership. These may include rates, insurance, body corporate fees, maintenance and repairs. Remember, if you need help crunching the numbers, I can assist. I’ll also let you know about any grants or concessions you may be entitled to (like the First Home Owner Grant), which could help get you into your own home sooner.
4. Getting the wrong mortgage
As a first-time buyer, getting your head around all the different home loan products out there can be overwhelming. Offset accounts and redraw facilities. Fixed versus variable rates. Split home loans and lines of credit. It’s enough to give you a head spin! It’s important to choose the mortgage that is most suitable for your needs and saves you as much money as possible.
My role as your mortgage broker is to: 1) understand where you’re at financially and where you want to be; 2) compare the home loan market; 3) find you the right home loan, based on your specific financial circumstances; and 4) walk you through the home loan application process.
5. Being blindsided by emotion
When you’re new to the property hunt, it can be easy to let emotions cloud your judgement. However, try not to let your daydreams get in the way of the facts. Do your research to ensure you’re buying the right property for the right price. If you need help, we can give you some guidance about how to research a property properly to make an informed decision.
With careful planning and support, buying your first home will be a positive experience. As your mortgage broker, I’ll help you every step of the way and can refer you to other professionals whom you can rely on. Please call me – let’s make your home ownership dream a reality!
How would an RBA rate rise affect you?
It’s been nearly eight years since the Reserve Bank of Australia (RBA) last raised the country’s official cash rate. Interest rates have been at historical lows for quite some time and as a homeowner, you may never have experienced an “official” rise in interest rates.
At present, interest rates remain low and we expect them to stay that way for a while. However, forecasters predict Australia’s economy will continue to strengthen over the next 12 months and as it does, an RBA cash rate rise becomes more likely.
So, how does the cash rate affect interest rates and ultimately, your home loan repayments?
Understanding the RBA cash rate
The RBA cash rate sets the prime interest rate on overnight loans in the money market. In simple terms, it’s the interest rate that every bank must pay on the money it borrows. The official cash rate is currently at 1.5%.
The RBA may decide to change the official cash rate for a variety of reasons. These include:
- stimulating the economy,
- managing inflation,
- controlling fluctuations in the Australian dollar,
- to encourage or discourage consumer borrowing and spending. (For example, a rate rise often stimulates the Australian dollar, which can negatively affect export businesses and our tourism industry).
How would a rate change affect your home loan?
When the RBA makes a change to the cash rate, lender’s interest rates will usually move in line with the change. In recent times, lenders have also been making minor ‘out-of-cycle’ interest rate changes (outside the RBA’s rate movements) but historically, major home loan interest rate changes have been determined by RBA decisions.
A change in the official cash rate will affect the interest rate you pay on your home loan and can drastically affect your mortgage repayments if you’re on a variable rate home loan.
Rate changes usually occur in fractions of a percentage point, but this can still have a big impact on the size of your monthly home loan repayments.
So, how do you prepare for a home loan interest rate rise? Here’s a few suggestions that could help to make sure you’re not caught on a financial back foot.
Consider switching to a fixed interest rate
With a fixed rate home loan, your interest rate will be locked in for a pre-determined period. You won’t have to worry about fluctuations in the cash rate or interest rates. Plus, you’ll know exactly how much your repayments will be during the fixed period.
Another option is to hedge your bets and fix part of your mortgage, while leaving the rest variable. This is called a split loan. These options could help to protect you from interest rate rises in the near future, however you will still need to plan and budget for a rise in repayments once the fixed period has ended.
Build a buffer into your home loan
A good idea is to make extra repayments while interest rates are still low, so you can build in a buffer by getting ahead on your repayments. You could also channel any spare money into a redraw facility or offset account. These loan features reduce the interest you’ll have to pay over the life of the loan.
Shop around for lower interest rates now
If your current home loan isn’t competitive, you’ll be left even more out of pocket if rates rise. It may pay to shop around now for a more competitive home loan that better suits your financial circumstances and goals.
Pay down your debts and consider consolidating
It’s a good idea to pay down any variable debt, particularly credit cards, while interest rates are low. Concentrate on paying off debts with the highest interest rates first, then knock over the others.
If you have multiple debts of different types, you may like to consider consolidating everything into your home loan or a personal loan. Consolidating is not necessarily right for everyone, so it’s very important to speak to your broker before proceeding.
As a homeowner, it’s important to be prepared when interest rates head north. If you’d like to know more, please get in touch today. We are always ready and willing to answer any questions you may have, help you save money on interest and find ways to prepare for any future rate rises.
5 Reasons to buy a home during the holiday season
Everyone looks forward to Christmas and the summer holiday season. After all, ‘tis the season to be jolly. To indulge in festive fare. To get out in the great outdoors and enjoy quality time with family and friends. But this year, it could also be the right time to buy a home. Here are 5 reasons why clever property buyers are considering making a purchase this holiday season.
Spring is one of the busiest times of year in Australia’s property markets. That’s when all the buyers are out in force and vendors have the best chance of getting their price. If a vendor is still trying to sell come summer, they’re often highly motivated – or even desperate – to get a sold sticker on that notice board.
This year, spring auction clearance rates were lower than they’ve been for a while. Now summer has arrived, there are many more properties on the market than usual. Motivated sellers are good news for you – they may be more willing to negotiate.
Looking for a property during spring can be a nightmare. Open home inspections are packed and by the time you decide you might be interested in a property, there’s usually several offers already on the table. This can be frustrating and detrimental to your capacity to negotiate.
If you start your property hunt when others are away on holidays, you can avoid all the hassle and drama. Again, fewer buyers means vendors may be more willing to negotiate.
Traditionally, property prices fall in December. Last year, the average national home price fell by 0.3%. This year, we can expect this drop to be larger than usual – particularly as there was still a lot of properties left on the market at the end of spring. Prices are already starting to drop in our bigger property markets like Brisbane, Sydney and Melbourne.
The moral of the story? Summer could be the time to buy property – it’s a buyer’s market right now and it probably won’t last for long. CoreLogic are predicting home values are likely to move back into growth territory in most markets by June 2019.
There’s no getting around it. Buying a property takes time and energy. It takes considerable research and a lot of time travelling around to open home inspections.
If you’re working full-time, it can be hard to make time to do it right. You’ll likely be devoting weekends and evenings to your property hunt. The solution? Do your research and inspections while you’re off work and on holidays. That way you’ll get it done faster.
Nothing motivates people to wrap up a deal quickly like the idea of taking a break. That goes for real estate agents, lenders, vendors and buyers! Things tend to go much more smoothly when demand is less, so you’re more likely to see a hassle-free settlement during summer than a busier time of year. There are also more special home loan offers available during the off-season, so talk to us to find out more.
So, why not put beach life on hold for a while, and spend the holiday season looking for a bargain on a fantastic new home? If you’re in the market to buy, talk to me about getting pre-approval on your home loan now. It could be a great way to start the new year off with a bang!