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💡 How Higher Interest Rates Are Impacting Borrowing Power 💡
Higher interest rates are making it harder for borrowers to qualify for home loans or larger loans. For every 0.50% increase in interest rates, a person's borrowing capacity decreases by about 5%, according to PropTrack's senior economist, Paul Ryan.
Since 2022, the Reserve Bank of Australia (RBA) has raised official interest rates by 4.25 percentage points, effectively reducing the average person’s borrowing power by around 40%.
🔍 What’s next? If the RBA starts cutting rates, borrowing capacities will likely rise. Alternatively, the banking regulator, APRA, could also help by reducing the mortgage serviceability buffer. This buffer is added to interest rates when assessing your ability to repay a loan — for example, if your loan has a 6.20% interest rate, banks would assess whether you could still afford repayments if rates rose to 9.20%.
Currently, this buffer is set at 3 percentage points, but APRA has decided to keep it steady for now, given factors like high household debt, rising credit growth, cost-of-living pressures, and a weakening job market.
So, while your borrowing power remains somewhat constrained for now, there could be changes down the line to give you a little more wiggle room. Stay tuned! 📉
27/12/2024
If you're planning to buy a home in early 2025, the latest data suggests you may be in a great position! 📊
According to CoreLogic, this year's spring selling season saw sales volumes 4% lower than the average from 2019-2023. At the same time, the median time it took to sell a home increased from 28 to 32 days between August and November 2024.
What does this mean? 🤔 It shows that sellers are starting to face more competition with other vendors, rather than buyers fighting over limited properties. As we move into 2025, this could lead to pressure on sellers to lower their asking prices, giving buyers more negotiating power! 🙌
If you're in the market, keep an eye on these trends – it might be the right time to secure a great deal! 🏡💰
06/12/2024
🏠 Thinking about Renovating? You’re Not Alone! 🛠️
Renovations are on the rise, with Australians investing a whopping $2.84 billion on home improvements in the June 2024 quarter, according to the Australian Bureau of Statistics. Whether you're updating a bedroom, bathroom, or kitchen, it's clear that home renovations are more popular than ever!
If you're planning your own renovation, here are 3 ways to finance your project:
🔨 Construction Loan
A construction loan lets you draw funds in stages, with interest charged only on the amounts received so far. It’s interest-only during the building phase, then switches to a regular principal-and-interest loan when your project is complete.
🔨 Cash Out Home Loan
If you have equity in your home, this could be a faster option. The process is usually simpler than a construction loan and could give you the cash you need.
🔨 Paying Cash
If you’re in a position to do so, paying upfront is the simplest way to avoid any future debt.
🚨 Caution: Thinking about using a credit card to fund your reno? Be careful! While the application process may be easy, the high-interest rates can quickly lead to debt problems.
Ready to renovate? Let us know what you're planning, or ask for advice on the best way to finance your dream home makeover! 👷♀️💡
19/11/2024
Interstate purchasing is rising, why is this happening?
Some people are looking to buy interstate for affordability.
Meanwhile, some investors are targeting out of state location that seem to offer better returns.
Here are some due-diligence tips if you’re thinking of buying interstate:
- Use data to research the suburbs where you are thinking about buying
- Order building and pest inspections for homes that you are seriously interested in
- Research a Property Manager in the area to assess the rental return
- Consider hiring a Buyer’s Agent to help you find what you are looking for
Finally, we are here if you need us for your finance needs.
Think about obtaining a pre-approval to make your offer that bit stronger.
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