RBA LIFTS CASH RATE TO 3.35%

The Reserve Bank of Australia has increased the cash rate by 25 basis points (0.25%) to 3.35% on Tuesday, 7 February. This is the ninth consecutive rate rise, now sitting at the highest point in over a decade (since September 2012).
This is the first cash rate hike this year, but the RBA has hinted that more rate rises are expected to try and push back inflation to its 2-3% target. Inflation rose to a 30-year high, 7.8% in December 2022.

VIEW STATEMENT

With yesterday’s increase alone, monthly repayments on an average variable rate home loan have gone up by an estimate:

• $81 on a $500,000 loan, $969 since April, 2022.
• $121 on a $750,000 loan, $1,454 since April, 2022.
• $161 on a $1,000,000 loan, $1,939 since April, 2022.

Calculation source: www.canstar.com.au

JANUARY PROPERTY PRICE FALL BY 1%

House prices are predicted (keyword) to fall in 2023 as interest rates continue to rise. For the time being, let’s look at the facts. Check out January’s report by capital city in the table above, with the following notes to consider:

• The value of Australian property has dropped by 1% in January 2023, according to the CoreLogic Home Value Index.
• January is the ninth consecutive and smallest month-on-month decline since June 2022.
• Since peaking in June, the combined regionals index is down -7.4%, while capital city values are now -9.6% below their April peak.
• January saw Sydney’s median dwelling property value hit below the $1 million mark. This is the first time since March 2021.

Source: CoreLogic’s January Home Value Index

HOME LOAN TRENDS

SAVE MONEY WITH AN OFFSET 

2% fixed rate home loans are soon to expire, and there has been a considerable increase in interest caused by nine consecutive cash rate hikes. After the fixed rate term, home loan repayments are going to go up significantly, so you not only need to search for the most competitive interest rate in the market, but also consider opening an offset account to help reduce your monthly repayments.

An offset account is like an everyday transaction bank account, except it is linked to your home loan. The major benefit of an offset account is that the balance will be offset daily against the home loan principal, reducing the amount of interest you pay.

Sound confusing? Let us put it into perspective…

If you have a $700,000 home loan and $50,000 in your offset account, interest will be paid on $650,000 of the full amount. And if the loan period is 30 years on a 5% interest rate, and you deposit $500 a month in the offset account, you could save $268,555 in interest over the course of your entire loan, and your term period would be reduced by 5 years and 11 months. That is a decent amount you can be saving.

FIRST HOME BUYER CHOICE

With First Home Buyer Choice, first home buyers can choose to either pay stamp duty (an upfront payment) or annual property tax (an ongoing payment) on their first property purchase, up to the value of $1.5 million.

Stamp duty is roughly 4% of the property value, and is paid at the time of settlement. Therefore, if a first home buyer purchases a $1 million property, they will have to pay around $40,000 on top of their deposit at settlement. But, if the first home buyer chooses to go with annual property tax, they’ll have to pay just an annual property tax, in which the amount depends on the type of property and location.

So which choice is best for you?

CONTACT US TO FIND OUT