Welcome to our July Newsletter

Property prices are climbing to record highs, interest rates are on hold but could be dropping again soon, and buyer demand remains strong.

We may be in the throes of winter, but the property market is anything but cool.

In June, property prices continued their upward trend, rising 0.6% across the month. Experts say the growth can be attributed to the cash rate cuts earlier this year and limited housing supply.

With the new financial year kicking off, several new and expanded housing schemes are set to come into effect. To find out about your eligibility for the schemes or to explore your borrowing capacity, get in touch today.

Interest Rate News

The RBA decided to keep the cash rate on hold at 3.85 per cent at its latest meeting, leaving many economists stunned. Most were banking on a cash rate cut, given the latest inflation data.

Figures from the Australian Bureau of Statistics showed the Consumer Price Index (CPI) rose 2.1 per cent over the 12 months to May, down from a 2.4 per cent rise in the 12 months to April.

Underlying inflation, as represented by the trimmed mean, fell to 2.4 per cent in May – the lowest it’s been since November 2021. That’s well within the RBA’s target band of 2-3 per cent.

The RBA board was split in its decision, with six voting to keep rates on hold, and three against, shifting away from recent consensus decisions.

Governor Michele Bullock said the board was united in its view on the direction of interest rates, just not on the timing of cuts.

Bullock said the board would wait to see if the quarterly inflation data, due out at the end of July, showed another decline before deciding on a possible rate cut.

Some economists believe the RBA’s decision to keep the cash rate steady could slow the pace of price growth we’ve seen in the property market of late. If you’re looking to buy, now could be a good time to chat to us about your finance options.

The RBA’s next monetary policy decision will be announced on 12 August.

Australia’s Big Four banks all expect a cash rate cut next month.

Home Value Movements

Australia’s property values rose by 0.6 per cent in June, marking a fifth consecutive month of growth, according to Cotality (known previously as CoreLogic).

Every capital city recorded a positive change except Hobart, where property prices dropped by -0.2 per cent.

The median house price in Australia’s capitals is now sitting at $1,034,806, while the median unit price is $697,233.

Falling interest rates have been a clear catalyst of the renewed momentum in housing prices, said Cotality research director Tim Lawless. “The first rate cut in February was a clear turning point,” he said.

“An additional cut in May, and growing certainty of more cuts later in the year, have further fuelled positive housing sentiment, pushing values higher.”

Lawless said advertised supply was tracking 5.8% below the same time a year ago, while auction clearance rates rose above the decade-average in the last two weeks of June.

Ready to buy?

The busy spring selling season is just around the corner. If you’re planning a spring property purchase, talk to us about your finance options early.

It might be worth exploring some of the new and expanded housing schemes coming into effect this financial year. Under the Help to Buy shared equity scheme, the government will contribute up to 40 per cent of the purchase price for new homes or 30 per cent of existing homes for eligible borrowers. Buyers would only need a 2 per cent deposit and wouldn’t have to pay lenders’ mortgage insurance (LMI). Help to Buy is expected to open later this year.

Meanwhile, 50,000 new Home Guarantee Scheme places have been released this financial year:

35,000 places for the First Home Guarantee

10,000 places for the Regional First Home Buyer Guarantee

5,000 places for the Family Home Guarantee.

One of the Albanese government’s election promises was to remove the income and property price caps for the First Home Guarantee, meaning that from January 2026, all first home buyers will be eligible to purchase a home with a 5 per cent deposit without paying LMI.

To explore your eligibility for these schemes, or to talk through your finance needs, get in touch today.

Let’s make your purchasing dream a reality.

Additional sources

CoreLogic RP Data Daily Home Value Index: Monthly Values
https://www.cotality.com/au/our-data/indices
https://www.realestate.com.au/auction-results/

Using your Equity to Buy an Investment Property

If you’ve paid down your home loan somewhat or your property has appreciated in value, you may be able to use your home’s equity to fund an investment property purchase.

Knowing how to use your home equity can help you achieve financial goals, but it’s important to weigh the risks, like increased debt and changing interest rates.

Let’s look at what equity is, why use your equity to buy an investment property, and how to do so.

What is equity?

Equity is the difference between the market value of your property and the balance remaining on your home loan.

Say your property is worth $1,000,000 and you owe the lender $200,000. Your total equity is $800,000.

However, not all of that equity is accessible. This is where usable equity comes in. Banks will typically lend you 80% of the value of your home, minus your existing loan balance.

In this example:

80% of the property’s value = $800,000

Subtract the loan balance = $800,000 − $200,000

Usable equity = $600,000

In some instances, you may be able to borrow more if you take out Lenders’ Mortgage Insurance (LMI).

Why use your equity to invest?

Using the equity in your home to purchase an investment property can be a powerful strategy, but it’s important to weigh both the benefits and potential risks. That’s why it’s essential to seek professional advice – whether financial, legal, or tax-related – to ensure this approach aligns with your goals and circumstances.

Let’s take a closer look at some of the key advantages and potential drawbacks of using your equity to invest.

Pros

No need to save a deposit. You can use the equity in your home to buy your next property, without having to save up a large deposit. It means you can jump back into the property market sooner, and seize on market opportunities.

Potential tax benefits. Buying an investment property may have tax implications. For example, some investors use strategies like negative gearing, which can affect their taxable income. You may also be eligible to claim deductions on expenses like interest on the loan, property management fees, and maintenance.

Expand your property portfolio. Investing in property may offer benefits like long-term capital growth and rental income. It allows you to potentially benefit from the appreciation on multiple properties over time, as well as opening up an income stream (via the rental return).

Increase your borrowing capacity. Using your equity may allow you to borrow more than you could with just your income and savings, giving you access to properties with a bigger price tag.

Cons

Increased debt: By borrowing against your equity, you’ll be increasing your total debt. You’ll need to be able to service a larger debt and the costs associated with owning your home and an investment property.

Market risk: If the value of your investment property decreases, it could affect the equity in your existing property, potentially leaving you in negative equity territory. This is where your debt outweighs the value of your properties.

Tax implications: You may be liable for capital gains tax when you sell the investment property. It’s a good idea to run through the tax implications of using your equity to buy an investment property with your tax accountant.

How to use your equity to invest?

Refinance to access equity

Refinancing to unlock your equity is a popular option. This involves taking out a new loan to pay off your old mortgage, with some money left over – that is, your equity. You can then use that money as a deposit, and take out a new loan for the investment property.

Home loan top up

A common way to borrow against the equity in your home is to get a home loan top up or increase. This involves increasing your current mortgage limit to allow you to access the funds (which can then be used for a deposit for the investment property).

Cross-collateralisation

Cross-collateralisation involves using your home as collateral and adding it to the new investment property loan, to help get the purchase over the line. In this scenario, you’d end up with 2 loans – the original mortgage secured by your home, and the new mortgage secured by your home and the investment property.

Line of credit

Another option is to set up a line of credit and use the money as a deposit for your investment property. With this scenario, your lender would approve you for a specific amount, based on your usable credit. The benefit of a line of credit is that you only pay interest on the amount that you borrow, rather than the entire limit.

Like to know more?

There may be other finance options to help you use your equity to buy an investment property (such as a supplementary loan or home equity loan).

To get started, give us a call today to talk through how you can unlock your equity – we’re here to help!

How your credit report affects mortgage applications

If you’re new to buying property, you’ll want to understand your credit report and how it may impact your home loan application.

Think of your credit report as your financial report card, showcasing how you manage your debts and financial obligations.

Here’s why it’s important when you want to take out a home loan.

What is a credit report?

A credit report is a detailed account of your credit history, compiled by credit bureaus. It includes your credit products, repayment history, personal information, defaults, credit applications, bankruptcy records, and credit report requests.

Lenders take into account your credit report when deciding whether to lend you money and when assessing your creditworthiness.

What about a credit rating?

Your credit report includes a credit score, otherwise known as a credit rating.

This value is calculated based on what’s in your credit report. Factors such as how much money you’ve previously borrowed, the number of credit applications you’ve made and your tendency to pay on time will all be taken into account when calculating your credit rating.

Depending on the credit reporting agency, your score may be between zero and 1,000, or zero and 1,200. The higher the credit score, the better.

Where to access your credit report

You can access your credit report for free every 3 months. It’s a good idea to review yours once a year, particularly if you’re planning to buy a property in the near future.

To request a copy, try these credit reporting agencies:

Experian 1300 783 684
illion 132 333
Equifax 138 332

Keep in mind that different agencies may have different information about you, so you might have to reach out to multiple agencies for your credit report.

What if something doesn’t add up

If you notice something is incorrect in your credit report, for example that some of the debts are not yours or that your personal details are wrong, contact the credit reporting agency and ask them to fix it. There shouldn’t be a charge for this.

It’s really important to do this, as failing to do so could jeopardise future credit applications.

Tips to improve your credit score

Manage credit card balances: Keep balances low and within the credit limit. Pay off balances in full or more than the minimum payment.
Use credit responsibly: Avoid maxing out cards, make timely payments, and don’t take on excessive debt.
Review your credit report: Regularly review for changes or errors, promptly reporting inaccuracies.
Pay your bills on time: Set up direct debits to automatically pay your bills before the due date.
Improve your credit mix: If your credit mix lacks diversity, this can have a negative impact on your credit score.
Limit new credit applications: Apply only when necessary to avoid numerous hard inquiries.

Can you get a mortgage with a bad credit report?

If your credit report isn’t in the greatest shape, don’t despair. There may still be ways to secure the finance you need to purchase your home.

Some lenders specialise in ‘bad credit’ home loans and take into consideration any personal circumstances that may have affected your ability to repay in the past. These kinds of loans often come with higher interest rates and fees, but if your options are limited, they may be worth considering.

To chat to us about your finance options, including whether a specialist lender could help you, get in touch today.

7 cost-effective tips for keeping your home warm during winter

With today’s cost-of-living pressures, winter can be a challenging time financially for households, especially with soaring electricity and gas bills.

Here are some tips to manage your energy costs this winter and keep the household budget in check.

1) Be smart about heating

Firstly, choose your heating wisely. According to Choice, reverse-cycle air con is the cheapest way to heat your home.

Portable electric heaters are convenient and cheap to buy, but they’re expensive to run and will drive up power bills. Choice estimates that running a reverse-cycle air conditioner for an entire year could cost less than running an electric heater for the winter months.

Next, heat only the rooms you’re using, rather than the entire property. Close the doors to any unused spaces and save on energy and cost.

Instead of blasting the thermostat, opt for a comfortable temperature of between 18 and 20 degrees. Every degree of additional heating can add up to 10 per cent on your energy use.

If your heating system has a programmable function, pre-set it to warm your home during the times of day when you really feel the cold.

To save money, turn off heating when you’re not home or overnight.

2) Seal gaps and cracks

To heat a room efficiently, aim to seal any gaps or cracks that could create a draught.

Up to 40 per cent of your heating can be lost through the windows. Check windows are closed properly and draw the blinds or curtains to retain the heat inside.

You might even consider double glazing, though this can be costly.

Ensure doors are firmly closed and use a draught stopper for added heating efficiency. If you have hard floors, lay down thick rugs for added insulation.

3) Warm yourself up in cost-effective ways

To reduce your power bills, rug up rather than reaching for the heater remote during winter. Consider materials that are warm, like flannel for your bed linen and wool clothing.

A hot water bottle or heated throw is a cost-effective way to warm up, rather than heating an entire room. Just be sure to read the instructions and safety warnings.

Lastly, keep showers short and sharp. Heating hot water can account for over 20 per cent of household energy use.

4) Service your heating systems

Regular maintenance of your heating system is important for efficiency, so that it doesn’t have to work harder to heat your home.

Clean the filters and ensure the vents are clear of dust. It might take you 10 minutes, but it could help reduce your energy consumption and save you money in the long run.

Gas heaters should be serviced by a professional.

5) Be mindful of insulation and appliances

How well is your property insulated? Heat can escape easily from poorly insulated properties. Having a fully insulated home could reduce heating and cooling costs by as much as half, so it’s worth considering.

Upgrading to energy-efficient appliances is another way to save money on your electricity bills over time. Don’t forget to turn off appliances that are not in use at the power point (such as televisions and computers), so that they’re not using energy while in standby mode.

6) Switch ceiling fans to reverse

Switch your ceiling fans to reverse mode, which will make the blades turn anti-clockwise. This will disperse the warm air from your heating system around the room and back down towards the ground.

7) Make the most of the sun

During the day, allow as much sunlight into your home as possible to warm it up naturally.

If you have the budget for solar panels, they can be a worthwhile long-term investment to help reduce your energy costs.

With the right planning, your winter heating doesn’t have to break the bank.

If you’re looking to renovate your home to make it more energy efficient, or you’d like to purchase a newer home with better energy performance, chat to us today about your finance options.