Lower interest rates and APRA’s easing of home loan rules is great news for buyers
Following nearly three years of the official cash rate holding firm, the RBA delivered two consecutive cuts in June and July this year. The two 25 basis point cuts put the cash rate at a record low of just 1 per cent. There is now speculation and the futures market are indicating that further cuts of up to another 75 basis points could occur by the middle of 2020.
While the interest rate cuts may not be passed on completely by the banks, we can expect to see mortgage rates fall further to below 3 per cent. Combining this with the Australian Prudential Regulation Authority (APRA) confirming on 5 July 2019 that it would relax its lending restrictions on banks and other financial institutions, housing affordability is posed to be at its best levels for many years.
Effective immediately, banks no longer have to assess home loan applications using the minimum 7 percent interest rate. Instead, they’ll be able to set their own minimum assessment rate, as long as they ensure borrowers can repay loans using a ‘buffer’ of at least 2.5 per cent. These two factors mean we are looking at a stunningly low borrowing cost for those buying a property.
With interest rates at an all-time low, the market starting to turn and APRA’s easing of restrictions, there has never been a better time to contact your local mortgage broker to book an appointment and get the ball rolling.
What does this mean for me?
This ease in lending restrictions, is great news for both first home buyers and investors. As people can now borrow larger sums of money, we are arranging loans for people who previously thought themselves locked out of the Melbourne property market.
As a Melbourne based mortgage broker, I’m watching with great interest as the local market is poised to take a very welcome upward shift. As some variable interest rates drop to 3.05% p.a and 3.64% comparison rate for owner occupied loan with principle and interest rate repayment, it’s a great time to take advantage and step onto the property ladder.
The state of the Melbourne market
Let’s face it, it’s been a tough couple of years for the Melbourne property market. There hasn’t been a property downturn since the 1980’s and after the market peaked in late 2017, everyone from lenders, home sellers and mortgage brokers have been holding their breath, waiting to see what would happen next.
According to Domain, Melbourne’s median house prices rose 0.3 per cent over the June quarter, with unit prices rising 2 per cent. Domain economist Trent Wiltshire notes: “More buyers are attending open for inspections, sentiment has improved, and auction clearance rates are at the highest point since November 2017,” And Melbourne mortgage brokers such as myself are excited by the possibility that now open up for my clients.
By taking advantage of the lower interest rates, the ease in lending restrictions and a market on the upswing, it’s a great time to buy or sell. What this means is you and your family could be living in your dream house a lot sooner than you expected.
First Home Loan Deposit Scheme
If you’re a first home buyer in Melbourne, the good news just keeps on coming because the federal government has announced a First Home Loan Deposit Scheme will come into effect on 1 January 2020. Some important information about the scheme:
• If you’ve saved 5% of the purchase price of your property, the government will guarantee the remaining 15%
• It’s limited to 10,000 borrowers
• Single people earning up to $125,000 or couples earning up to $200,000 will be eligible
• The value of eligible homes will vary depending on the region The scheme does have its risks, especially with property prices falling, and experts are divided on its potential effectiveness. But this is why you need your own mortgage broker.
At Mel Finance, we do all the hard work for you, can sit down with you and run through all the pros and cons before you make your final decision.w
So, if you’re starting to think your dream of getting into the Melbourne property market is suddenly looking a bit more real, call today to book an appointment and we can turn that dream into a reality.