Rateseeker Round-up: February Property News
After 704 days, Australia’s international border has finally reopened — bringing with it a wave of optimism for the future. In addition to this significant event, there were plenty of updates from the property sector this February.
If you missed the latest property news from the past month, don’t panic. Here are four big updates you need to know.
Borrowers set new home loan activity record
According to the latest data from the Australian Bureau of Statistics (ABS), home loan activity reached a record high in December. Australians committed to $32.8 billion of mortgages in December, which was 4.4% higher than the month before and 26.5% higher than the year before.
Of these, owner-occupier loans accounted for $22.5 billion, which was up 5.3% month-on-month and 12.4% for the year. Investor loans accounted for $10.3 billion, an increase of 2.4% over the previous month and 73.9% annually.
One main reason why so many Aussies are entering the market is due to the market boom that’s been taking place over the past year. Another key market driver is interest rate levels, which have remained ultra-low even amidst speculation of an expected rise later this year.
First home buyers get savings boost with First Home Super Saver Scheme
In welcome news to buyers looking to get into the market, the Federal Government has increased the First Home Super Saver Scheme savings threshold from $30,000 to $50,000.
This scheme allows first home buyers to salary sacrifice pre-tax income into a dedicated account within their superannuation fund. The maximum contribution is up to $15,000 per year, and now up to $50,000 in total.
There are two benefits to the First Home Super Saver Scheme:
- Any money that a first home buyer deposits into the scheme is taxed at 15% rather than the income tax rate, which is 19% for incomes up to $45,000 p.a. and 32.5% for up to $120,000 p.a..
- When first home buyers do withdraw their money, they are allowed to withdraw their original deposit plus approximately 4.7% interest, which is a higher rate of interest than they would earn through a regular savings account. Withdrawals are generally taxed at the marginal tax rate minus 30 percentage points.
Buying your first home can be daunting. That’s why it’s best to partner with a mortgage broker to ensure you’re getting the sharpest rate on your home loan. Here at Rateseeker, we’ve helped countless Aussies save on their first home, and we’d love to do the same for you.
Home building costs rise 7.3% year-on-year
Supply chain shortages have plagued Australia’s economy for months, and property is no exception. Construction costs are rising at the fastest annual rate since 2005, as builders struggle to get their hands on materials such as timber and metal products.
According to CoreLogic’s Cordell Construction Cost Index (CCCI), home building costs rose 7.3% in the 2021 calendar year. However, there is a silver lining: the pace of growth might be trending down, with costs rising 3.8% in the September quarter but only 1.1% in the December quarter.
Australians prepare for an interest rate rise
After more than 130 months without a rate rise, the Reserve Bank of Australia (RBA) has finally said it will increase the cash rate at some point this year or next year.
When cash rates rise, banks will almost certainly also raise their mortgage rates. If you already have a mortgage or you’re planning to buy a property in the near future, there are some actions you can take to be prepared for a possible rate rise.
Here are five tips to help:
- Calculate by how much your repayments would increase if your home loan rose by anywhere from 0.25 percentage points to 1.50 percentage points in the years ahead.
- Get ahead on your mortgage now with extra payments. This way, less of your loan needs to be repaid when those rate rises occur.
- Increase your savings rate, so you’re covered if your monthly repayments increase.
- Contact your lender today to ask for a rate cut. If you mention you are considering switching to another lender, there’s a good chance your lender will agree to your request.
- Think about refinancing from a variable-rate loan to a fixed-rate loan.
Wondering how a rate rise may affect your financial situation? Get in touch with Rateseeker today for a no-obligation consultation.
** General Advice Warning
The information provided on this website is general in nature only and it does not take into account your personal needs or circumstances into consideration. Before acting on any advice, you should consider whether the information is appropriate to your needs and where appropriate, seek professional advice in relation to legal, financial, taxation, mortgage or other advice.