Welcome to our October Newsletter

The flowers are in bloom, the birds are singing, and the property world is abuzz with eager buyers. Few things energise the property market quite like the spring selling season.

The Reserve Bank of Australia (RBA) may have left interest rates on hold at its latest meeting, but property price growth continues to trend upwards. All capital cities across Australia saw dwelling values increase in the month of September.

Population growth is an important indicator for housing demand, and investors should keep in mind that Australia’s population growth has been easing since Q3 of 2023, driven by a normalisation in overseas migration and a low rate of natural increase (births minus deaths), though there has been a quarterly upswing. Despite the overall slowdown, population growth remains above long-term averages.

Migration trends within Australia are stabilising, returning to more typical patterns seen before the pandemic, with fewer people moving to Queensland and Western Australia, and more people relocating to Victoria.

If you’re looking to snap up a property this spring, chat to us about pre-approval on your finance today.

Interest Rate News

The Reserve Bank of Australia (RBA) decided to keep the cash rate on hold at 3.60% at its latest meeting, after the latest inflation data came in higher than expected.

The Consumer Price Index (CPI) rose 3% over the 12 months to August, following a 2.8% rise in the 12 months to July.

Underlying inflation, as represented by the trimmed mean, was 2.6% to August, down from 2.7% to July.

RBA governor Michele Bullock said the bank was wary of any uptick in inflation.

“Market services and housing inflation were a little higher than we were expecting,” she said.

“So we’re just being a little bit cautious about that. It doesn’t, I don’t think, suggest that inflation is running away, but we just need to be a little bit cautious.”

If you haven’t reviewed your home loan recently, it may be worthwhile getting a home loan health check through us.

The next RBA cash rate decision will be announced on 4 November.

Home Value Movements

Growth in property values across Australia gained pace last month, driven by record-low listings as buyer demand heats up.

In September, we saw the strongest monthly rise in national dwelling values since October 2023. Perth and Brisbane led the way, with values up 4% and 3.5% respectively through the September quarter.

“The number of homes for sale at the end of September was about 53% lower than average in Darwin, 45% below average in Perth and down 31% in Brisbane,” Cotality research director Tim Lawless said.

“At the same time, estimates or quarterly home sales are tracking above average, demonstrating a clear disconnect between supply and demand.”

The extension of the Home Guarantee Scheme for first home buyers, now branded the Australian Government 5% Deposit Scheme, may put further upward pressure on property prices.

The scheme allows buyers to purchase their first home with a 5% deposit, without having to pay lenders’ mortgage insurance (LMI), with the government guaranteeing a portion of the loan. There will be no caps on places or income limits, and price caps will increase (up to $1.5 million in Sydney, for example).

Ready to buy?

With fewer listings than normal for this time of year and strong competition among buyers for properties, this spring is shaping up to be a seller’s market.

That makes it crucial to have your finance sorted before you start making offers.

Pre-approval gives you the confidence to act and shows sellers you’re serious. If you’d like to be ready to move when the right property appears, get in touch today and we’ll help you line up the right finance.

Additional sources: Cotality Data Daily Home Value Index: Monthly Values https://www.realestate.com.au/auction-results/

Refinancing Surge brings Relief
for Homeowners

Following three cash rate cuts so far this year, the lending and borrowing environment in Australia has changed drastically.

As a result, more and more borrowers are breaking out of ‘mortgage prison’ and refinancing their home loans to more competitive options.

If you’ve been trapped with the same lender for some time, you may be able to break free and find a more suitable home loan elsewhere

What is mortgage prison?

While there are no barred windows, high walls or guard towers in a ‘mortgage prison’, it can still feel quite burdening if you’re a borrower locked into one.

A mortgage prison is where a borrower cannot refinance their home loan, often because they don’t meet serviceability standards or because of insufficient equity. This inability to refinance means borrowers end up stuck with a lender, potentially forking out more in interest than they should be.

A variety of factors can lead to the mortgage prison scenario, including falling property prices, interest rate hikes or changes in income.

Many Australians became mortgage prisoners after taking advantage of low fixed-rate loans during the COVID-19 pandemic. When their fixed rate terms eventually came to an end, they found themselves facing rising variable interest rates they struggled to afford.

What’s the latest with the current lending landscape?

So far this year, there have been cash rate cuts in February, May and August. As a result, serviceability pressures have eased substantially.

Many borrowers who previously found themselves in a mortgage prison have been released and are able to refinance to more competitive home loans – and that’s exactly what they’re doing.

Recent rate cuts in February, May and August have prompted a wave of activity, as Australians take advantage of improved borrowing conditions to switch to more competitive deals. According to recent RBA data, the gap between rates for existing and new owner-occupiers has shrunk to a record low of just 0.04 percentage points, suggesting that refinancing is increasingly on the radar for borrowers.

Why refinance?

Some key motivators to refinance include:

To secure a lower interest rate (and reduce your mortgage repayments)
To change your loan term (paying your home loan off faster reduces the interest you pay over the life of your loan)
To unlock equity for big-ticket purchases, like an investment property, new car or your kids’ education.
To access a loan that better suits your needs (for example, with interest-saving features like an offset account or redraw facility)
To consolidate debt.

What to expect next?

The RBA has previously said it would take some time for the full effect of the cash rate cuts to become evident. The number of people refinancing home loans is expected to rise, as more lenders decrease interest rates to remain competitive.

However, with the Reserve Bank of Australia likely to keep rates on hold, borrowers will need to manage their mortgage repayments without any expectation of immediate relief. As rates are projected to stay steady until early 2026, homeowners are being urged to review their loans and shop around for more competitive deals.

Like to chat?

With the market continuing to shift, it might be worth taking another look at your home loan to see if it’s still working for you.

Your serviceability may have improved, or you may have more equity than you thought and be able to refinance to a more suitable home loan.

Remember, refinancing could make a difference to your loan over time, so it’s worth considering.

Get in touch today.

Common Mistakes when Buying your First Home

First home buyers can now purchase a property with as little as 5 per cent deposit without copping lenders’ mortgage insurance, after the government’s expanded First Home Guarantee Scheme came into effect on 1 October. It’s expected that 70,000 first home buyers will make the most of the scheme in its first year of expanded access.

If you’re looking to purchase your first home, there are a few common mistakes to be aware of before you dive in.

But first, let’s take a look at the expanded scheme and what it means for buyers.

Unpacking the Australian Government 5% Deposit Scheme

The scheme, formerly known as the Home Guarantee Scheme and now branded the Australian Government 5% Deposit Scheme, aims to help more Australians to buy their first home sooner.

Eligible first-time buyers on all income levels can purchase a home with a 5 per cent deposit, without having to pay costly lenders’ mortgage insurance (LMI). The government acts as a guarantor for 15 per cent of the home loan.

Price caps on eligible properties have lifted, and there is now no limit on the number of people who can apply. First home buyers in Sydney, for example, could purchase a $1.5 million home with a $75,000 deposit. A $950,000 home in Melbourne would require a $47,500 deposit.

As a first-home buyer, it’s an exciting time to be entering the market. Here are some common mistakes to be aware of.

Potential pitfalls with first-home purchases

1. Underestimating your purchasing costs

Saving your deposit is only one piece of the puzzle. You also have to consider the other upfront costs of buying a home, which may include:

Stamp/transfer duty
Transfer fees
Building and pest inspections
Legal or conveyancing fees
Loan establishment fees
Moving costs.

There are also ongoing costs to factor into your budget, such as council rates, water and utility costs, body corporate fees (for example, for apartments), maintenance and insurance. All of these need to be included in your budget.

2. Being led by emotion, not reason

It’s easy to fall in love with a property’s aesthetics and potentially blow your budget or overlook its flaws.

Take a critical approach when inspecting properties and make sure the property you settle on ticks your key boxes.

Remember that there will always be another property that you could call home, even if this one falls through.

3. Not getting pre-approval on your finance

Pre-approval is an indication of how much a lender is likely to lend you, based on an initial assessment of your income, expenses, assets and liabilities.

Getting pre-approval gives you a clear understanding of your spending limit, narrows down your property search and strengthens your ability to negotiate with sellers. You’ll be in a better position to make an offer or bid at auction with confidence, knowing your finances are in order and ready to go.

Pre-approval for a home loan usually lasts for 90 days.

4. Skipping the building and pest inspection

You may be tempted to skip a building and pest inspection to save money, but that could ultimately cost you thousands in the long run.

You’ll want to ensure the property is free of structural problems and unwanted pests like termites, or other issues like asbestos or rising damp, before purchasing.

Arrange the building and pest inspection before you sign the contract of sale to avoid unwelcome surprises.

Ready to get started?

Buying your first home is exciting, but it’s important to have experts on your team steering you in the right direction.

As your finance broker, we’ll run through your current financial situation and purchasing goals, then find you the right home loan for your specific needs.

We can also explain whether you’re eligible for any first home buyer government incentives that could help you achieve your goals sooner.

Get in touch today

4 signs to spot a
'Growth Suburb'

While some property investors prioritise rental yield – that is, how much income a property earns, as a percentage of its value – others see capital growth as the ultimate objective.

There is no guaranteed way to predict the future capital growth of a suburb, but there are growth indicators that can be a strong sign that property prices will increase.

In the current buying climate, with historically low listings and strong demand for available properties, doing your homework is key before buying an investment property. Here are 4 signs to look out for when researching a suburb’s capital growth potential.

1) Demand is likely to outweigh supply

Ideally, if you can find a suburb where demand is likely to exceed supply, that’s usually a strong indicator of potential growth.

Look at how much available land there is in the suburb. Is there much more capacity to build new houses? If the answer is ‘no’, then property prices may go up.

Also consider the likely population growth in coming years. If more people are expected to move to the area, demand for housing will increase, thereby potentially pushing up dwelling values.

Checking the average property days on the market, discounting rates and auction clearance rates can also help you ascertain the level of demand in a suburb.

2) There’s strong investment in infrastructure

Say the government is investing in new infrastructure in the area – maybe with a new school, hospital or train line. That may help push housing prices upwards in the near future.

New or improved transport links can make a suburb more attractive to commuters, for example, while other investments in infrastructure can create employment, increasing the demand for housing among workers.

Do some digging online to see what planned infrastructure works are in the pipeline. The local council can also be a good resource to investigate upcoming infrastructure projects.

3) The suburb is being gentrified

When buyers with higher incomes move into a lower socio-economic suburb and begin making improvements, gentrification happens.

The average income in the area increases, and those individuals spend money on improving the suburb (whether by renovating or by spending locally).

Signs of gentrification include:

New hospitality or retail venues are springing up in previously uninviting areas
Established homes are being renovated
New residential buildings are being built
Larger infrastructure projects are in the pipeline
A younger demographic is moving in.

Once a suburb undergoes gentrification, property prices often head north, so check for the signs that things are heading that way.

4) Nearby suburbs are experiencing capital growth

If a suburb nearby has experienced a surge in prices in recent years, chances are that growth could trickle across to neighbouring areas.

When you’re doing your suburb research, consider areas that have experienced recent price growth. If there are surrounding suburbs that are more affordable and yet to experience a boom, they may be worth investigating for potential investment opportunities.

Ready for your next move?

If you’ve found a property with strong potential and you’re ready to grow your portfolio, I can help you organise the finance to make your next investment move possible.

Get in touch today to discuss your options.