30 Sep 2015
Spring is here and we’re all looking forward to the busiest time of year in property markets around the country! If you’re planning on getting in on the action, we’re ready to find you a great deal on your financing – so whether you’re looking at refinancing your existing mortgage, buying a new home or planning to invest give us a call!
There has been a lot happening in our financial markets this month, with volatility in our share markets and interest rates on the move even though the Reserve Bank of Australia decided to keep the official cash rate on hold at 2.0 per cent during its September meeting.
APRA’s increased supervision on investment lending has caused a general rate adjustment for both owner-occupier home loans and property investment loans. While some lenders are raising the interest rates on their property investment loans by 20 – 50 basis points in line with APRA’s restrictions, they are simultaneously reducing their interest rates on owner-occupier loans by a similar margin.
This is great news if you’re a first home-buyer looking to get into the market this spring. It’s also great news if you’ve been considering refinancing an existing loan – you can now access some of the lowest rates on record and you could potentially save a lot of money on repayments. If you’re looking to invest, or refinance a property investment, we have identified lenders who are offering some great rates, so please give us a call.
Melbourne and Sydney property markets have remained hot throughout winter, whilst most other markets succumbed to the usual winter slow period. Things are now starting to pick up again with auction numbers starting to increase for the week ending August 30.
In Victoria there were 1185 scheduled auctions with a 78% clearance rate, while in NSW there were 1083 scheduled auctions with a 78% clearance rate. These auction figures really outstrip activity in other states. (However it should be noted that in areas outside our two major capital cities, many vendors prefer private sale over auctions).
In Queensland there was 159 auctions with a 58% clearance rate, South Australia offered 100 auctions with a 65% clearance rate, Western Australia 34 auctions with a 67% clearance rate, and Canberra had 47 auctions with a 68% clearance rate. Tasmania scheduled only 8 auctions and recorded a clearance rate of 75% and Northern Territory held just six auctions with no results.
Since last month, changes in home values have been marginal around the country. Sydney showed an increase in home values of 1.14% over last month and 17.55% over this time last year. Melbourne showed a marginal decrease over last month of 0.03% but was still up by 10.59% over this time last year. Brisbane and Gold Coast was up by 0.34% this month and 4.29% over this time last year.
Adelaide was up by 0.67% this month and 1.79% since last year, Perth is showing declines – 1.26% since last month and 1.79% over this time last year. Darwin was up marginally by 0.34% this month but is down by 4.57% over this time last year. Canberra seems to be trending downwards with a 1.69% decrease in home values this month and a decrease of 0.86% year on year. Hobart showed a fall in home prices of 1.13% this month, but was up 1.5% over this time last year.
If you’re excited about the property opportunities coming up this spring, and you should be, then we’d love to chat about your plans. We’re here to help you organise the most beneficial financing arrangements for your property purchasing needs according to your personal financial situation and goals. So please don’t hesitate to give us a call today.
Information sources: Auction results: www.realestate.com.au/auction-results
Home values: www.corelogic.com.au/research/monthly-indices.html
Sincerely, Element Finance
23 Sep 2015
Over the past few months, there has been a lot of chatter in the media about APRA tightening controls on lending for investment property purchases. And as property investment is one of Australia’s most popular ways to build wealth for the future, it has understandably raised a lot of questions from our clients about how this will change the game for those currently looking to invest. But what is APRA actually doing and why? How will it affect your capacity to get an investment property loan if you’re looking to buy this spring?
What is APRA?
First of all, we should explain APRA and the role it plays in the finance industry. APRA is the Australian Prudential Regulatory Authority and it acts as Australia’s finance industry watchdog. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies and the superannuation industry. Their mission is to establish and enforce standards and practices to ensure that our financial industry remains stable, efficient and competitive.
APRA is concerned that the property market is becoming overheated, particularly in Sydney. This follows home price growth of over 18% in the Sydney market over the past year. APRA is concerned that an overheated market may be subject to rapid price adjustments and this could not only destabilize our entire financial industry, but prove to be extremely risky for the average residential property owner or investor.
What restrictions has APRA imposed?
APRA is primarily concerned about the rate at which the big four banks have been issuing property investment loans. In order to cut it back, they have done two things:
- Increased the capital reserves the big banks are required to hold for their exposure to residential property mortgages; and
- Enforced their requirement that the bank’s investment lending does not grow by more than 10% annually.
The result is that the big four banks have raised interest rates on property investment loans. They have also tightened their lending criteria, so that property investors may now require a larger deposit and must be in a financial position to meet their repayments in the event of significant interest rate rises in future. They are also discouraging interest only property investment loans as these are considered more risky in a property market that may be subject to rapid declines in home values.
How will this affect you if you’re looking to invest now?
First of all, let’s look at interest rates on property investment loans. While it’s true that some banks have raised interest rates on property investment loans, these rate rises only represent a 20 – 50 basis point rise, meaning that the increased interest rate on property investment loans is only a half a percent or so higher on average than most owner-occupier loans. When you take into consideration that interest rates were down to all-time historical lows anyway, this will not prove to be much of a deterrent to those of you looking to invest in property this spring.
Additionally, not all of the lenders are at risk of exceeding APRA’s requirement that investment lending does not grow by more than 10% annually. This means that many of the smaller lenders have not raised their interest rates on property investment loans very much – in fact, some of them have not raised their rates at all.
This is where it really pays to have a good mortgage broker on your team. If you are planning to purchase an investment property this spring then talk to us and we will shop around to find you the most advantageous rate!
What about the tighter lending criteria – how will this affect you?
If you are about to purchase an investment property, then the bank’s tightening of lending criteria may have some effect. It is likely that the amount you can borrow has recently been reduced by 10-15% for the same level of income. Additionally, the big four banks will most likely require a 20% deposit, whereas in the past they would have accepted 10%. (Some smaller lenders are still approving investment property loans with a 10% deposit, so if necessary ask us to shop around.)
The result is that your purchasing power may be reduced and if you want to invest this spring, you may have to look at purchasing a less expensive property. For most property investors, this will prove to be only a minor stumbling block – after all a 15% reduction in your buying power isn’t very much. You may have to work a little bit harder to find a suitable investment, but at the end of the day you will most likely be able to find something that suits your budget.
Good advice is now more valuable than ever
The fact is, it’s more important than ever to be able to get good advice about your loan structuring and a mortgage broker who is able to shop around amongst a wider variety of lenders to get you the best rate the market has to offer.
We’re happy to say that’s our job! Since the APRA restrictions have come into play, we have been able to help several clients find great financing options for their investment property purchases and lower rates for those looking to refinance. We’re confident that we can help you too. If you’re in the market to purchase a property this spring, then give us a call. We’re here to help.
17 Sep 2015
Spring is finally here. But if you’re anything like us, you can’t wait for summer to arrive so that you can hit the beaches with family and friends for some swimming, surfing, boating and even sailing! To give you a taste of what’s in store, we’ll refresh your memory about some of Australia’s favourite beaches so you can start planning your escape!
Byron Bay, NSW
One of the most truly amazing beach destinations in NSW would have to be Byron Bay. It was once an undiscovered hippy community but these days, has blossomed into a hot tourist destination. Byron sports a series of beautiful, long stretches of typically uncrowded beach where you can surf, lie in the sand, snorkel or swim in absolute peace. There’s the nearby picturesque Byron Bay lighthouse to enjoy, plus some great eateries and cafés in the town itself. It makes a great get-away year round.
There are literally so many gorgeous beaches in Queensland that it’s hard to choose just one or two. Noosa is the obvious choice, giving us a showcase of everything the spectacular Sunshine Coast has to offer. Nestled in a fantastic beachside resort, Noosa Main Beach is a patrolled beach that makes it perfect for families, swimming, sailing, and more. Right off the beach you can often see pods of dolphins and whales migrating up and down the coast. And on the shores, you can see Koalas and other wildlife easily accessible to passers by. Just a short walk away, Noosa Park headland is home to the Noosa Festival of Surfing every March.
Cottesloe Beach, WA
Located between the Perth central business district and the port of Fremantle in Perth’s western suburbs, this fantastic city beach is only 15 minutes from the city center and has to rival Bondi as one of our most popular city beaches. Offering clear sparkling waters and amazingly bright white sands, Cottesloe is the perfect place to watch the sun set over the Indian Ocean. It also has a reputation for some of the best seafood in the country… yum!
Wineglass Bay, TAS
One of Australia’s most beautiful beaches is the spectacular Wineglass Bay, which is located in Tassie’s amazing Freycinet National Park about three hour’s drive from Hobart. Considered one of the top ten beaches in the world, Wineglass Bay is a simply gorgeous curving stretch of sand that is contrasted against pink granite cliffs and sparkling turquoise waters. Fishing, sailing, sea kayaking and rock-climbing are all popular past times in Wineglass Bay, but we want to go there to just soak up the sun and spectacular scenery.
Casuarina Beach, NT
Darwin offers a host of lovely beachside destinations to choose from – which is a good thing in place with such hot and humid weather. Casuarina Beach is a popular choice, located on the doorstep of the northern suburbs, it’s just a short stroll to your choice of nature reserve and mangroves, or the City Mall where you can find ice cream, coffee shops and the wave pool. Another popular beachside destination is the Mindil Beach Market which kicks into life every year between May and October.
Apollo Bay, VIC
Surprisingly enough, Victoria has quite a few gorgeous beaches to choose from, but we’re picking Apollo Bay because it’s at located along the Great Ocean Road, a truly spectacular 90 minute drive from Melbourne. Apollo Bay beach itself is a lovely stretch of sand, but other attractions in the area will have you up and about, rather than lazing in the sun. Just up the road is the Twelve Apostles, a set of spectacular limestone pillars that rise up out of the Southern Ocean against the backdrop of the Port Campbell National Park – a sight not to be missed!
Glenelg Beach, SA
Glenelg is not just one of Australia’s best city beaches, it’s also a spectacular tourist destination offering fantastic shops, restaurants and bars at its gorgeous marina and jetty precinct. In fact, there’s an amazing choice of beaches just minutes from Adelaide’s city centre including Brighton Beach, West Beach, Henley Beach and more. Walk just 20 minutes north from Henley jetty and you’ll discover the Grange, complete with romantic coastal dunes and an historic jetty.
Getting ready to enjoy the spring and summer months may include an investment in a sailboat, speed boat or even a caravan to get you and the family out and about enjoying the spectacular lifestyle our fantastic country has to offer. Don’t forget that we’re here to help if you require financing for any personal assets – we do more than just home loans. It you want to make a purchase to help you make the most of our upcoming summer months, just give us a call!
10 Sep 2015
What is pre-approval and what is subject to finance? Many first home buyers believe you don’t need pre-approval if you intend to use a subject to finance clause in the sales contract when you find a property to buy. But that’s not the case! In this article we explain why it’s a wise move to get pre-approval on your home loan and use a subject to finance clause as well if you can.
What does ‘pre-approval’ mean?
When you’ve saved your deposit and you’re ready to purchase your home, it’s a wise move to talk to us about getting pre-approval on your home loan. Pre-approval is where a lender confirms how much money they may be prepared to lend to you to purchase a home, based on the deposit you have saved, your income, expenses and your personal financial situation.
Getting pre-approval on your home loan is intended to give you clear guidance on how much money you can spend, so that it makes it easier for you to shop for a suitable home in your price bracket. It is important to remember that the amount you are pre-approved for is the maximum amount a lender believes that you can currently afford to borrow according to your personal circumstances.
If you intend to purchase a property at auction, it is important to get pre-approval on your home loan before you attend the auction so that you can be reasonably comfortable that you can borrow the required funds. Getting pre-approval will give you a bidding limit and help you to be reasonably sure that everything will go smoothly with the transaction.
It is important to note that even with pre-approval, a lender can still decline a loan application if they do not like the property you are looking to purchase. If they feel it is over-priced or something is wrong with the property, they will not approve your final loan application. However, getting pre-approval significantly reduces the risk of this occurring.
Additionally, some real estate agents and vendors will not take you seriously if you do not get pre-approval on your home loan before you approach them, particularly when you are buying off the plan or are considering building a new home. Remember, they are frequently approached by time-wasters and ‘tire-kickers’ – getting pre-approval will help them to realize you are a serious buyer.
- Getting pre-approval is free and gives you considerable peace of mind, especially when bidding at an auction.
- Your pre-approved home loan is usually valid for up to three months.
- It helps you set your maximum spending limit – particularly important at an auction.
- It shows real estate agents and vendors that you are serious about purchasing a home.
What does ‘subject to finance’ mean?
When purchasing a property outside of an auction, the bank will always perform an independent valuation of the property to find out its current market value before agreeing to lend you the money you need to purchase it.
When you make an offer on a home, you will be required to make the offer in writing and this is called a sales contract. In this contract, you have the option to include a clause that says your offer is ‘subject to finance’. This means that your offer is conditional upon the lender approving the amount of finance you will need to purchase that particular property. If the lender does not approve the amount of financing required, you can withdraw your offer without losing your deposit or being any worse off.
You need to remember that property sellers and real estate agents are naturally out to get the maximum amount of money for a property that they possibly can. This can often mean that the asking price of a property exceeds its market value and also the amount of money a lender will allow you to borrow for that particular property.
It is important to note that a lender will only allow you to borrow what the valuation says the property is worth – even if you have been pre-approved to borrow more. That’s why it’s important to get pre-approval and use the subject to finance clause in your sales contract as well if you can! If the lender’s valuation turns out to be less than the asking price, you can always go back to the vendor and use the valuation to get a better deal.
- You may think a property is a good price, but using a subject to finance clause in the sales contract gives you additional peace of mind that you’re not paying too much.
- Using the subject to finance clause gives you room to withdraw your offer if the asking price exceeds the lender’s valuation on the property.
- It can often help you to negotiate a better price if the lender’s valuation is lower than the asking price.
Things to consider
- Sometimes a real estate agent will look less favourably upon your offer if you use the subject to finance clause in the sales contract. Always remember to mention that your financing is pre-approved to help mitigate any negative view.
Remember, if you have any questions about the property purchasing process, we’re here to help. We understand that getting you pre-approval on your home loan is important as it can save you a lot of time and hassle when searching for your new home. If you’re currently in the market for a new home, then please give us a call and we’ll help you get your pre-approval organised.
02 Sep 2015
In March last year, an amendment was made to the Privacy Act 1988, which allowed regulation reforms to be applied to the way credit-related personal information can be collected about you by lenders. The new system is known as ‘Comprehensive Credit Reporting’ and has brought Australia in line with the rest of the world regarding the way consumers are assessed by lenders when applying for credit and home loans.
The new rules have now been in effect for over a year, and most lenders are using Comprehensive Credit Reporting as part of their day to day operations when assessing you for a loan. This article looks at how Comprehensive Credit Reporting affects you and your capacity to borrow.
How have things changed?
Previously, lenders were only allowed to access negative information about your credit history. By ‘negative’ we mean that they were only able to access information that indicated if you had any major credit infringements, credit payment defaults, bankruptcy situations and declined applications for credit. This information did not give lenders a very good picture about your current financial situation and was only of limited use when making assessments on major credit applications like home loans.
Comprehensive Credit Reporting is designed to give lenders enough information about you to assess if you can afford to take on more debt and how much you can afford to repay. Lenders now have access to more data about you more often, which gives them a better picture of your current personal financial situation.
Information that credit providers can collect about you now includes account information including when an account was opened and closed, your credit limits on credit cards and loans, the type of credit accounts you hold (such as credit card or personal loan), as well as 24 months repayment history on any credit accounts you hold. They can also check on your overdue debts and payment defaults, the number of recent credit applications you have made recently and any publicly available information such as personal insolvency information, court writs, court judgements and directorship information.
What does this mean for you?
The new Comprehensive Credit Reporting system gives you more power to demonstrate your creditworthiness to mortgage lenders and other credit providers. It allows your recent good credit behavior to be taken into consideration and any adverse financial events to be overcome more quickly. It is also faster and easier for you to establish a credit history and compile a Credit Report.
On the downside, it is more important than ever before that you pay your bills on time. It is also important that you avoid making multiple credit applications before you decide on your credit provider as these will show up as minor defaults. If you’re not careful, you could accumulate a lot of minor defaults that could add up to make it appear as though you are under financial stress – and that may make it more difficult for you to get a home loan approved or make you ineligible for the lowest interest rates.
Make sure your Credit Report is accurate
Your Credit Report is compiled by a credit agency and is made available to lenders when you apply for a loan. Understanding your Credit Report and making sure it is correct can help to ensure your loan application goes smoothly.
Lenders will use your Credit Report to assess risk before they decide to give you a loan. We recommend that you obtain a copy of your Credit Report and make sure that is completely accurate. You can download a copy of your Credit Report once every 12 months for free from a variety of different credit reporting agencies – we recommend Veda or Dun & Bradstreet.
Once you have your Credit Report, you can address any negative information that should not be on there and take action to have it removed. Occasionally, your Credit Report can contain information that is very old, untrue or contain fraudulent entries that simply belong to someone else – so it pays to give it careful attention before you apply for any loans.
If you obtain your Credit Report and discover you have a low credit score, you can improve the situation over time with the right behavior:
- Take action to remove any incorrect entries.
- Always pay your bills on time or before the due date.
- Pay down your existing debts.
- Keep unused bank accounts open.
- Reduce your credit limits – cancel any credit cards you don’t need.
- Don’t make multiple applications when you are shopping for credit – talk to us about choosing the correct provider before you submit any loan applications.
Comprehensive Credit Reporting is good for Australian consumers as it helps lenders to be fair when assessing you for a loan. If you would like to discuss your Credit Report with us, we’re happy to help. Remember, we’re here to help you get the best deal available for your personal financial situation and goals for your mortgage and other financing requirements, and your Credit Report is an important part of the application process. Please give us a call today for a chat.