Rateseeker Property News Round-up August – 2023

Rateseeker Property News Round-up August – 2023

In the ever-changing landscape of the real estate market, several critical trends have emerged.

Refinancing activities have surged by an impressive 12.6%, reflecting homeowners’ keen interest in capitalising on favourable lending conditions.
Meanwhile, interest rate data has been unveiled, shedding light on the financial climate that property buyers and investors must navigate.

On the rental front, a lingering shortage continues to challenge tenants and landlords alike, raising questions about the long-term solutions to this housing conundrum. In a bid to address these concerns, the government has set an ambitious homebuilding target, aiming to create a substantial increase in housing supply.

Read on as we explore the intricate web of factors shaping the real estate landscape over the last month, from refinancing trends to governmental initiatives, providing a comprehensive view of the state of the property market.

More Aussies to refinancing year after year

Recent data from the Australian Bureau of Statistics (ABS) shines a light on the enduring trend of robust refinancing activity in recent months. Borrowers are actively seeking opportunities to switch lenders, responding to the challenges posed by rising interest rates.

In the month of June, owner-occupiers and investors collectively refinanced a substantial $20.2 billion in loans with external lenders, as highlighted in the ABS report. While this figure marked a 3.1% decrease compared to the previous month, it’s crucial to consider the broader context. When compared to the same period the previous year, June’s refinancing activity exhibited impressive growth, showing a significant 12.6% increase.

Moreover, what makes this trend particularly noteworthy is the fact that the last 14 months consecutively rank as the 14 biggest months in the history of refinancing. This emphasises the ongoing demand for refinancing solutions among borrowers seeking to optimise their financial positions amidst changing market conditions.

With interest rate increases impacting many households, refinancing emerges as a strategic financial move. It provides an avenue for borrowers to potentially secure more favourable terms and reduce mortgage costs. If you’re currently feeling the pinch of rising interest rates, exploring refinancing options could be a smart strategy worth considering. By evaluating your existing loan and financial situation, comparing it to the current market offerings, and potentially presenting money-saving options, refinancing can help ease the financial strain and improve your overall financial health.

Interest rates hold steady amid competition despite recent hikes

In the face of rising interest rates since last year, there’s a surprising silver lining for borrowers, and it’s all thanks to the fierce competition among lenders, as highlighted by insights from the Reserve Bank.

Between May 2022 and June 2023, the cash rate climbed by a substantial 4.00 percentage points. This might seem alarming at first glance, but when we turn our attention to the actual interest rates experienced by borrowers, a more reassuring picture emerges. During this same period, the average interest rate for variable-rate loans in circulation increased by a comparatively modest 3.37 percentage points.

What’s particularly noteworthy is that this rate hike isn’t felt uniformly across all borrowers. When we consider all types of outstanding loans, both variable and fixed, the average interest rate increased by 2.75 percentage points during this timeframe. This variance is largely due to some borrowers still benefiting from low-rate fixed loans that were secured before the onset of the rate hikes.

This unique situation underscores the significance of timing in the mortgage market. Borrowers who locked in favorable fixed rates prior to the rate increases have found themselves shielded from the full impact of rising interest rates. Meanwhile, competition among lenders has played a pivotal role in maintaining relatively manageable rates for those with variable-rate loans.

However, as economic conditions evolve, it’s important for borrowers to remain vigilant and assess their own financial strategies to ensure they continue to benefit from the best available rates and terms.

A noteworthy development in the mortgage landscape is causing ripples among borrowers who secured fixed-rate mortgages a couple of years back when interest rates were at historic lows. According to insights from the Reserve Bank, approximately 5.5% of outstanding housing credit saw borrowers transitioning from these low-interest fixed-rate mortgages to considerably higher rates during the June quarter. This trend is expected to persist throughout the remainder of this year before showing signs of decline in 2024.

The key factor at play here is the maturation of fixed-rate mortgages, which were obtained when interest rates were exceptionally favorable. As these mortgages reach their expiration dates, borrowers may find themselves facing higher interest rates, potentially impacting their monthly mortgage payments.

As a result, the average outstanding mortgage rate is anticipated to continue its ascent. This trajectory is primarily influenced by the rise in the cash rate that commenced in May 2022. This rate increase is gradually making its way into a larger portion of borrowers’ financial obligations.

It’s crucial for borrowers to remain vigilant about these developments and be prepared for potential adjustments in their mortgage expenses. Whether this means exploring refinancing options or adapting their financial strategies, staying informed is key to navigating these evolving market conditions.

Tight rental market contracts further with no solution in sight

Property investors across the majority of Australia are currently reaping the benefits of exceptionally low vacancy rates. A prominent property analysis by SQM Research recently revealed some intriguing statistics that bode well for landlords.

In July, the national vacancy rate stood at a mere 1.3%. This translates to a strikingly low number of rental properties sitting empty. For property investors, this landscape presents an advantageous position as they face fewer challenges in securing tenants.

Furthermore, with the competition for rental spaces heating up, many renters find themselves willing to pay a premium to guarantee a place to call home. This environment allows landlords to potentially command higher rents, creating an opportune moment for those looking to maximise their returns on investment.

This current trend doesn’t show signs of reversing in the near future, pointing towards sustained benefits for property investors in the Australian market.

Albanese government seeks to achieve ambitious homebuilding target

In a significant move aimed at addressing housing supply and affordability issues, the federal government has upped its construction target. Following recent deliberations with the National Cabinet, Prime Minister Anthony Albanese made a noteworthy announcement. The government has set an ambitious new national target to construct 1.2 million strategically situated new homes within a five-year timeframe, commencing on July 1, 2024. This target supersedes the initial commitment of 1 million homes, which was disclosed last year.

It’s noteworthy that out of this substantial housing endeavor, the federal government will directly oversee the construction of just 10,000 homes. The lion’s share of this ambitious housing initiative will be shouldered by the private sector, with some contributions expected from state and territory governments. In a bid to incentivize states and territories to surpass their housing targets and implement reforms to amplify housing supply, the government has earmarked a substantial $3 billion in performance-based funding.

Moreover, the government has introduced an additional $500 million competitive funding program designed to kickstart housing supply, particularly at the local and state government levels.

The overarching objective of this comprehensive initiative is to bolster housing supply. A substantial increase in housing supply is anticipated to alleviate demand pressures, thereby exerting downward pressure on property prices and ultimately enhancing housing affordability for the broader population. This multifaceted approach reflects the government’s commitment to tackling the housing challenge head-on.

If your fixed term rate is coming to an end and you’re looking to give your home loan a health-check, get in touch with our mortgage experts and secure the sharpest rate and save thousands in the long term.
Additionally if you’re looking to end the renting cycle and be your own landlord, we can help guide you with expert mortgage advice from pre-approval to settlement.

We’ve helped countless Aussie borrowers open doors to their new homes all across the country, let us help you own your dream home.