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Pre-Cut Mortgage Repayment To Save More

Homeowners will create the largest savings from interest rate reductions by keeping their mortgage repayments at pre-cut rates. The Property Education Company's mortgage broker Louise Lucas claims borrowers who do this can make their payments ahead and save long-term cash.

Following the two latest rate cuts, most variable home mortgage holders are set to save more than $100 a month, RateCity's comparison site tells Sally Tindall. "For many, they can spend cash paying off winter electricity bills, purchasing grocery stores or paying additional mortgage," she suggests. But it's an appropriate moment for those who want to make the most of the latest reductions to pay down their loan quicker, tells Steve Mickenbecker of Canstar's comparative site.

Canstar's average variable rate of 4.13 percent will have $1,979 monthly repayments on a $700,000 30-year mortgage, he claims. The typical rate was 4.3 percent before the two interest rate reductions.

Anyone who retains their present repayments would save interest on more than $13,383 and pay off their loan 14 months earlier.

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Property Prices Rebounds In June

House prices in Sydney and Melbourne have published their first monthly profits since 2017 in a sign that the downturn in the economy may be over in our two largest cities. For the two largest cities in June, both SQM Research and CoreLogic reported expansions, while SQM also discovered uplift in Brisbane, Perth, Adelaide and Hobart.

For buildings in Sydney, Melbourne and Hobart, CoreLogic reported monthly expansions and rises for flats in those three cities as well as Darwin. It was Sydney's first monthly growth since the market peaked in July 2017 and since its peak in November 2017 in Melbourne.

CoreLogic claims it's an early indication that reduced mortgage rates and enhanced confidence already have an impact of flow-on effect. "I'm not ready to say that the housing market will roar back," states Cameron Kusher of CoreLogic. “But it’s been looking like the worst is over  we’ve been seeing consistently the rate of decline has been slowing and now we’ve seen positive results for the first time.”

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We’ll Show You How You Can Eliminate Your Mortgage In The Next 5 Years!

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Property Market Fierce Competition in Auctions

June has been Sydney's highest auction month since September 2017 and Melbourne's February 2018, according to AMP Capital's economist Shane Oliver. Cashed-up buyers who bid their time are now beginning to move, as selling agents report a flow of requests, more individuals through open homes, and more competition at auctions.

"The momentum has improved well and really," he claims. "Since the election, it looks like the market bounce, the price cut and APRA is continuing to talk about relaxing their serviceability test."

With a preliminary clearance rate of 73% over the weekend from a pool of 463 auctions, Melbourne showed strong indications of a market turnaround. 68% of properties sold under the hammer in Sydney on Saturday from 428 expected auctions, compared to 55% the past week, according to Domain's collection outcomes.

Domain economist Trent Wiltshire suggests the clearance rate for Melbourne should stay close to 70% after all the outcomes of the auction are counted. He claims the small amount of auctions is likely to boost outcomes, although they are still strong.

Useful Links:

We’ll Show You How You Can Eliminate Your Mortgage In The Next 5 Years!

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Property Price Increase Expected 2020

Economic specialist Moody's Analytics predicted next year an increase in estate prices throughout every capital city in Australia except Hobart. Moody's national home value index has dropped for nearly two years, but according to Moody's Analytics report, Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin and Canberra will all see a consistent recovery in 2020.

It is predicted that now the Hobart housing market, which has been the leader among the capital cities over the previous two years, will fall significantly in 2020 and 2021. House values across Sydney are expected to rise by 3.1 percent next year, and by 2021 by another 4.8 percent, with apartment prices set to rise by 4 percent and 6 percent respectively in the next two years.

Next year, Melbourne will see a 1.3% upturn, followed by a healthier 6% in 2021. "Overall, house values for Greater Melbourne are anticipated to rise in 2020, with Melbourne-Inner East and Melbourne-North East leading the recovery," Moody's claims.

Useful Links:

We’ll Show You How You Can Eliminate Your Mortgage In The Next 5 Years!

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Banks Hold Back Rate Cuts

More than half of Australia’s banks and other lenders have defied the Reserve Bank and the Federal Government by refusing to pass last week’s full official interest rate cut to home loan borrowers.

Angry customers have been flooding mortgage brokers and loan advisers with refinancing requests since ANZ and Westpac started the trend by pocketing part of the RBA’s 0.25% rate reduction for themselves. An analysis by comparison website RateCity.com. au found 67 lenders had announced rate reductions since the RBA’s move on June 4, and 34 of them had not passed on the full 0.25%. More than 40 other lenders had not yet announced a move.

RateCity research director Sally Tindall says customers who have not received the full reduction have the right to feel ripped off - and also had the right to move their mortgage to another lender. Financial managing director Angelo Benedetti says many lenders had raised rates independently of the RBA in 2018, blaming it on increased costs of funding their mortgages.

“Now that funding costs have dropped, they haven’t fulfilled their obligations,” he says. “They’re double-dipping, which is not good. We are getting so many phone calls from clients asking to get them a cheaper option from elsewhere.”

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Auction Shows Market Confidence

Sydney has recorded its most successful auction week in more than two years, with analysts saying market confidence has increased significantly since the federal election result was followed by interest rate cuts and an easing of lending restrictions.

Sydney had 522 auctions last week, recording a preliminary clearance rate of 75%. This was higher than any final success rate recorded in the city since April 2017. Over the same week last year, a clearance rate of just 49% was recorded across 708 auctions in the NSW capital.

In Melbourne, 725 auctions were held last week with preliminary results returning a 68% clearance rate. Over the previous week, 215 auctions were held with the final clearance rate coming in at 63%. This time last year, 992 homes were taken to auction and a final clearance rate of 56% was recorded.

CoreLogic’s national auction commentator Kevin Brogan says the result was “significant”, with market confidence buoyed following the interest rate cuts and state and federal elections. “I think when you hear people talking positively about the state of the marketplace, that inspires a new-found confidence,” he says.

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Strong Real Estate Market Sentiment

Consumers think now is the time to buy a house and expect house price increases, a new report shows. The Westpac sentiment survey reports a “spectacular” rise in expectations of house price increases and a general improvement in sentiment from real estate consumers.

“Housing-related sentiment showed a clear response to the lowering in interest rates, although some of the gains were more muted than seen in past rate cuts,” Westpac senior economist Matthew Hassan says.

The time to buy a dwelling index showed a 1.8% rise to 116.9 points, while the house price expectations index recorded a “spectacular” 22.7% rise, Hassan says. “This is the highest level since August 2018,” he says. The RBA reduced the official interest rate to a historic low of 1.25% on 4 June. This, combined with a Coalition election victory and an easing of lending standards, has lifted market sentiment.

Domain economist Trent Wiltshire says the results are the early signs of a market turnaround. “The combination of the house price expectations index and the time to buy a dwelling index suggest consumers think prices are at or close to the bottom,” he says.

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Affordability Highest Point

Housing affordability has improved in most major Australian markets, according to two separate measures published in the past week. The Adelaide Bank/REIA Housing Affordability Report says affordability improved across the nation in all except one state in the March Quarter.

It found that the proportion of family income needed to make loan repayments decreased by 0.9 of a percentage point down to 30.3%. Every state and territory except the Northern Territory recorded an improvement in housing affordability, with the greatest change seen in NSW (1.3 percentage points). The weighted average capital city median price fell 2.2% over the quarter.

Another report found that housing affordability is at its best in 30 months as the Sydney and Melbourne markets become more accessible. The ANZ-CoreLogic Housing Affordability Report found recent falls in property values had pushed housing affordability to its highest point since December 2016, with property in some cities and regions the most attainable it has been in decades.

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Markets Tripled in 20 Years

House prices in 111 Australian locations have trebled over the past two decades, according to research from Propertyology. Analysis was conducted over the 20 years to the end of 2018 on 180 Australian towns and cities, all with populations over 10,000 people.

The research shows that regional markets have been competitive with capital cities on long-term capital growth. “Whether someone purchased in any of our eight capital cities 20 years ago or in most of Australia’s non capital locations, today it’s worth at least three times what they paid for it,” Propertyology’s Simon Pressley says.

Pressley says the median house price in Sydney 20 years ago was the most expensive in the country at $220,000 - however, anyone who bought in a major regional location back then would have paid a fraction of that price and achieved a similar growth rate. “Locations with a more affordable median house price have more upside potential for capital growth,” he says. “The real skill is being able to identify the locations with positive leading economic indicators.”

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RBA Demand Full Cut Interest Rates

Reserve Bank governor Philip Lowe has urged customers of ANZ and Westpac to take their business elsewhere because of their failure to pass on the RBA rate cut in full. Federal Treasurer Josh Frydenburg has also criticised those banks who reduced their mortgage rates by less than the 0.25% RBA reduction.

But mortgage broker Louise Lucas says those banks were already offering lower rates than competitors like NAB and Commonwealth Bank. Lucas, of the Property Education Company, says: “ANZ and Westpac have been buying business with much lower offers than the advertised rates.

They have been much lower than Commonwealth Bank for months. But they bring it on themselves by the way the way they publish their interest rates. “People should consult an expert because the standard variable rate that is advertised bears no comparison to the actual rate that borrowers are paying. We do a comparison across the major lenders every single day to find out what’s out there.” Lowe demanded that banks pass on the full cut in the official interest rate to help drive economic growth.

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House Price Increase

The housing market downturn in the biggest cities is coming to an end, according to economists predicting a spike in house prices as soon as July. Macquarie Bank’s equities strategy team says data has previously shown a huge bounce-back after a peak decline in property prices, with history expected to repeat itself soon.

“House price growth reached its worst on an annualised basis in January. Prices have continued to fall since then, but the rate of decline has slowed,” the bank wrote in a statement. “If you look at prior cycles, an increase in house prices occurred five to seven months after the trough in the annualised growth rate. Using the average of six months, prices could rise by July.”

Macquarie’s prediction is also attributed to interest rate cuts, relaxed lending conditions and the recent election result. AMP Capital chief economist Shane Oliver has similar sentiments. “The combination of the removal of the threat to property tax concessions, interest rate cuts, financial help for first-home buyers and APRA relaxing its 7% interest rate test, points to house prices bottoming earlier and higher than we have been expecting,” he says.

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RBA Cut Expect More Reductions

Three years after last reducing the official interest rate, the Reserve Bank of Australia has announced a widely-predicted cut to 1.25%. Many analysts expect a second rate drop in August, and some expect more.

Westpac chief economist Bill Evans last week forecast three reductions in the official interest rate in the next 6-7 months. Buyers’ agent Kate Hill of Adviseable (pictured) says the RBA decision delivers a quadruple effect for real estate markets on top of the trifecta of the election, the end to Labor’s negative gearing policy and APRA’s easing of lending criteria. “It will certainly liven things up a bit,” Hill says.

Property adviser Danny Buxton of Triple Zero Property says there are now increased levels of positivity and activity in real estate. “The positive changes from the past two weeks mean it’s a great time for people to reassess their goals and get expert advice,” Buxton says.

Realestate.com.au chief economist Nerida Conisbee says the rate reduction will have a positive effect on the market, with history showing that cuts have an immediate effect on search activity.

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FHB Pushes to Property Market

With a cash rate reduction looking almost certain next week, first-home buyers are gearing up to make their move into the property market, according comparison website Finder.

Finder has witnessed a 55% rise in visitors to first home buyer guides so far this month compared to May 2018. It’s the biggest spike in visitors to those pages in 12 months, coinciding with a long-awaited potential rate reduction the first change to the official cash rate in almost three years.

Graham Cooke, insights manager at Finder, says: “There’s a perfect storm brewing for FHBs. Property prices are dipping, lenders are dropping their rates and a first home buyer’s scheme is on the cards. “After 31 months of no change, all signs are pointing to a cash rate cut next Tuesday. The expected move is causing a flurry of rate drops among lenders, especially on the fixed home loan front.”

In the last week, seven lenders have lowered their rates on more than 48 owner-occupier loan products. Looking at the whole month of May, Finder analysis reveals this swells to 40 lenders across 333 products.

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Rate Reduction by RBA

The Reserve Bank will reduce the cash rate three times in quick succession, Westpac has forecast. And the first cut is all but certain to come next week, according to a survey of economists.

Westpac chief economist Bill Evans predicts the RBA will cut the cash rate in half over the next six months, taking it below 1% for the first time. Last week National Australia Bank forecast two rate reductions by the RBA this year. Evans is the first top-tier economist to predict three, with the easing cycle widely expected to start next week.

In a survey by financial newswire Bloomberg, all but one of 27 economists said they expected a rate cut in June and another soon after. Expectations grew significantly after RBA governor Philip Lowe said last week that a lower cash rate “would support employment growth and bring forward the time when inflation is consistent with the RBA target”.

The Commonwealth Bank says home loan applications jumped to a 10-month high in the week following the Election. CEO Matt Comyn says greater certainty in housing policies combined with cuts to interest rates and taxes could help to “stabilise” conditions.

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Positive Outlook for Real Estate Market

Real estate markets across the country have improved, with a “quadruple whammy of positive developments” credited with boosting buyer confidence. Auction outcomes have improved and developers are poised to re-activate stalled projects.

Buyers’ agent Rich Harvey from propertybuyer says the Election result, increased borrowing capacity from the APRA changes and the prospect of interest rate cuts have had “a dramatic effect”. Just over 2,000 homes were taken to auction last week with a clearance rate of 63%, the highest since September, according to CoreLogic.

Performance across all regions improved but was most notable in Sydney, with a clearance rate of 70% from 697 auctions. AMP Capital’s Shane Oliver says the first-home buyer deposit scheme, the end of threats to negative gearing, APRA’s move to lower hurdles to getting loans and prospects that the official interest rate will be cut, created a “quadruple whammy of positive developments”.