Image courtesy of 13interiors.

CASH RATE NOW AT 85%

As you may be aware the Reserve Bank of Australia lifted the cash rate by 50 basis points (half a percent) to 0.85% in June’s announcement. Industry experts were surprised by the size of the increase, but it seems the RBA is trying to work fast to tackle inflation.

There are forecasts the cash rate could hit 2.5% by the end of the year. If that happens, a borrower with a $500,000 loan balance could see their monthly repayments rise by $652 by December.

0.1% AUSTRALIAN HOUSE PRICE FALL

The property market may still be relatively strong but there are signs of it flatlining. Property prices dropped by about 0.1% nationwide in May, the first fall since September 2020. Sydney, Melbourne and Canberra led the price fall while Brisbane, Adelaide and a number of regional areas are continuing to experience growth.

– Sydney dropped by 1%. The median value is $1,120,836.

– Since January Sydney house values are down by 1.5% but sit at 22.7% above pre-Covid levels.

– Melbourne dropped by 0.7%. The median value is $806,196.

– Brisbane went up by 0.8%. The median value is $779,895.

– The top three suburbs in Greater Sydney with the biggest drop in property prices for the months of February, March and April include Beaconsfield by 8.5%, Darlinghurst by 8.3% and Surry Hills by 7.8% (CoreLogic).

Houses are also said to continue getting more unaffordable due to increasing interest rates causing reduced savings and tighter lending conditions.

Source: CoreLogic and REA’s PropTrack.

INTEREST RATE & HOME LOAN TRENDS

Potential property buyers are putting their future home purchases on hold thanks to the impact of the hike in interest rates. The value of new home loans has fallen by $2.3 billion in April, with new lending to owner-occupiers down by $1.57 billion and investor lending down by $557 million.*

– Fixed and variable interest rates are going up. Variable rates are expected to go up 0.50% after June’s rate increase.

– Investors are looking to rental yield since interest rates are on the rise. Yield is the annual net profit that an investor earns on an investment.

– Clients are cautious about not taking on bigger loans with the pending rate rises over the next few months.

– Refinancers are still using the equity in their home/s to purchase another property for owner occupier or investment purposes.

– Boutique and non-major lenders are offering first home buyers up to 85% of a property’s value with no LMI (Lenders Mortgage Insurance).

Ready for a home loan review? Most lenders have extended cashback offers of up to $6,000 for at least the next couple of months.

*Source: ABS Lending Indicators April 2022.