Crystele Homes

Interest rates decrease!

On the 4^th June, the Reserve Bank of Australia (RBA) cut the official interest rate by 0.25%, meaning that banks should take that reduction into account when offering loans, so anyone who applies for a loan after this would expect it to be slightly lower than what the rates were a month ago and their mortgage repayments would be lower.

The purpose in cutting the interest rate is to stimulate spending – because the interest on any debts owed drops, people then have more disposable income available, and tend to spend more. Whether that be in the retail sector, or in buying their new home.

Relaxed lending criteria on its way… When the bank assesses a buyer for their ability to pay a loan currently, they must factor if the buyer could still afford to pay the loan if the interest rate went to 7%. This is designed to give both the bank and the buyer a buffer in the event interest rates climb and was introduced in 2014 to make sure lending processes were sound. However, it’s worth noting that interest rates have not been at 7% or higher since 2012 and with the interest rate currently so low, there is no short-term fear that they will reach those heights again anytime soon.

The new guidelines will allow the lender a 2.5% buffer over the proposed interest rate – eg, for a rate of 2.5% the buyer must be able to still meet repayments if the rate jumped to 5%. This means the rates of success for buyers is expected to increase when these changes are rolled out, because more will able to meet these serviceability tests – which is great news for home buyers!

Retention of the coalition government? Ah, politics. Although we don’t really like to delve into politics, the fact that there was no change in the federal government gave a definite boost to the property market across the board, particularly for first home buyers with their promise of the “First Home Loan Deposit Scheme”. In effect, this scheme will assist 10,000 first home buyers per year to purchase a home with a deposit between 5 –20%, and the Government will cover any required Lender’s Mortgage Insurance (LMI).

This scheme is designed to support those struggling to save a deposit fast enough to purchase their home and has an income cap of $125,000 for an individual, or $200,000 if both members of a couple our first home buyers. There are further restrictions to property value dependant on region of purchase, but that’s it in a nutshell.

Further information about first home buyers concessions can be found HERE:

https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer

Further information about the First Home Loan Deposit Scheme can be found HERE:

https://www.liberal.org.au/latest-news/2019/05/12/helping-australians-buy-their-first-home