Image courtesy of @hareklein.

CASH RATE NOW AT 1.35%

On Tuesday, July 5 the Reserve Bank of Australia (RBA) lifted the cash for a third consecutive month by another 50 basis points (half a percent) to 1.35%. There are likely to be more rate increases to improve money conditions in Australia and tackle rising inflation (currently at 5.1%), caused by a lack of supply to demand in goods and services, the war in Ukraine, natural disasters, and limited labour markets.

Monthly mortgage repayments will go up by $144 as a result of yesterday’s decision for an average owner-occupier with a $500,000 debt, and 30 years remaining on their loan.

First-home-buyers who got in the property market just last year are said to be hit the hardest by the rate increases, as they will experience a significant increase in their repayments once their fixed rate term expires.

Image courtesy of @hareklein.

PROPERTY MARKET TRENDS

Interest rate rises and the increase in the cost of living are the main factors hitting property prices, the demand for home buyers, and homeowners’ ability to meet mortgage repayments.

– June saw a nationwide drop in property prices by -0.6% with Sydney leading the decline by -1.6%, followed by Melbourne by -1.1%, and Hobart by -0.2%.

– Property values rose in Adelaide by +1.3%, Darwin by +0.9%, Perth by +0.4%, Canberra by +0.3%, and Brisbane by +0.1%.

Source: CoreLogic

Drop in auction clearance rate

– Sydney’s auction preliminary clearance rate was at just 52.5% over the weekend, the lowest auction result since April 2020.

– The national auction clearance rate was at 55%, also the worst since April 2020.

Source: CoreLogic’s preliminary auction report

June increase in distressed sellers

– June saw a 10% increase in distressed sellers in NSW with more than 1,000 homes listed under distressed conditions.

– The number of distressed sellers nationwide increased by 4.5% with 2,330 homes in Queensland, 707 in Victoria and 250 in South Australia.

– A distressed seller is when a homeowner has experienced a sudden financial loss and, as a result, must accept a lower price than would normally be the case because they need to quickly sell their property.

Source: SQM Research

Image courtesy of @hareklein.

INTEREST RATE & HOME LOAN TRENDS

Variable & fixed rate increase

The average overall variable rate home loan rate for owner-occupiers is between 3.5% to 4%.

The average one-year fixed rate is above 4%, while the average two-, three-, four and five-year fixed rates vary between 4.5% to almost 6%.

Refinancers favour minor lenders

Owner-occupiers are rushing to get their home valued before prices drop even further, with the intention to purchase another property by refinancing their loan.

Refinances can save 22 basis points on home loan repayments for owner-occupiers and 49 basis points for investors switching from a big four bank rate to a non-major bank and lender offering digital home loans.

Home guarantee scheme

The federal government has added 40,000 new places to the Home Guarantee Scheme from 1 July:

– 35,000 places each financial year to support first home buyers to purchase a home with a deposit of as little as 5% (the First Home Guarantee).

– 5,000 places each financial year to support single parents with dependents to purchase a home with a deposit of as little as 2% (the Family Home Guarantee).

Monthly repayment increase

The cash rate in Australia is expected to hit 2.5% by the end of the year. This means people with a $500,000 home loan might be paying $629 per month extra, and those with a $750,000 loan might be paying $943 more.

Image courtesy of @hareklein.