Mortgage Repayments

The unease currently felt by many consumers has resulted in a 3.7% decline in home loan sales for July.

Many feel that these figures confirm a worrying trend – that the majority of Australians are still afraid about their financial future. Since the November 2010 interest rate increase, home buyers have become cautious and unwilling to invest in property.

Some young adults have even opted to move back into to their parents’ homes instead of purchasing their own homes.

Western Australia, supposedly the prime beneficiary of the boom in the resource sector, has the most dampened property market of any state.

Domestic financial news is dominated by discussions about rate hikes and the carbon tax. Globally there has been a stock market slump. Many feel that strong economic leadership is needed to inject some confidence back into the property market.

Refinancing accounted for the most active sector of the mortgage market, representing 39.1 per cent of all home loans. Owner-occupiers who are moving house or upgrading their present home accounted for only 11.7 per cent of sales.

With the last official cash rate increase by the Reserve Bank of Australia on Melbourne Cup Day, the major Australian banks lifted their interest rate higher than the 25-basis-point cash rate increase. This development has prompted a lot of borrowers to seek for other lenders especially the credit unions and trade societies.

Non-banking lenders have reported a significant increase in the inquiries that they receive about the mortgage deals. However, loan exit fees have discouraged many to switch loans. Yet, the Australian government is introducing policies to improve the competition against the four big banks in terms of lending.

Before you decide to switch loans, here are some aspects that you must consider. First, you must research for the best deals possible and check the ones that have the best coverage and features. Then, you must factor in the exit and entry fees when you switch loans and find out if it will help you save in the long run.

Then, you must decide if the switching costs are beneficial in saving more money in the future. Of course, these are easier said than done. Thus, you can seek the assistance of a mortgage broker in all of these needs. Who knows, maybe your broker can strike a better deal for you other than the deals that you have researched.

When you found a property that you would like to buy, you must contact the seller via a real estate agent and offer a price even if the house carries a fixed price or is up for auction. When buying your home it is important that you show your interest and that you negotiate on price.

Once your offer is accepted, you must sign a contract with the seller so that the legal process of the deal can be initiated. Before you offer is accepted, the seller can still shop the property around to get an even higher price until a contract has been signed.

Upon signing the contract, you are also agreeing to the terms and conditions that are within the contract. Therefore, it is very important that you read through every page of the contract. By reading the contract, you can also make sure as to what is included in the selling price.

When the contract has been finalised, it takes four to six weeks to settle the sale. This time is used to insure the property, fill up more mortgage papers, satisfy stamp duty fees and finalise transactions with your vendor. If an existing property is being sold, lawyers should work to fix dates of settlement.

If you would like to buy a home through other means, auctions can be another option. In an auction, you must have to fight for your desired property. You should also make sure that you can pay for the winning price including a ten percent deposit guarantee bond that you must pay during the auction itself.

Some auctions uphold that a reserve price must be met. If the highest bid for the property is lower than the reserve price, the highest bidder will have the opportunity to negotiate with the seller first. There is no guarantee though that the highest bidder will get the property.

Borrowers will pay about $50 a month more on their loans after the Reserve Bank increased its cash rate. It is the 6th increase since October last year.

The increase of 0.25% to the official cash rate adds about $50 a month to a $300,000, 25-year home loan, if the increase is passed on in full and brings the official rate up to 4.5%.

Most economists had been tipping the rate rise, with the market pricing in a 69 per cent chance that the Reserve Bank board would hike its cash rate by 25 basis points.

The Reserve Bank governor Glenn Stevens has advised that rates are now back at “average levels”.

“With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more,” Mr Stevens said in his statement to accompany the rates decision.

“The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels.
“This represents a significant adjustment from the very expansionary settings reached a year ago.”

Though Melbourne’s state parliament is keen in supporting an expansion project in their urban territory, the Opposition and the Greens have signified their intention of blocking the project.

This expansion project has been tied to the introduction of a growth areas tax that will shoulder the multibillion-dollar expenses for new schools, hospital and public transportation modes. This project will also sustain suburban housing growth.

However, the opposition is against the $95,000 a hectare growth areas tax on reclaimed Melbourne urban territory and they are ready to put the expansion to a halt if necessary. Also, David Vorchheimer, president of the Planning Institue of Australia’s Victorian, stated that though the growth areas tax is needed, its breakdown must be detailed.

The building industry is not happy with the new tax as well. To solidify their stand, the Property Council said that they would settle with zero boundary expansion until the growth areas tax is scrapped.

Opposition planning spokesman Matthew Guy stated that their group has serious concerns about this tax even though they have offered to negotiate with the state parliament ten months ago. On the other hand, the Greens’ Greg Barber told that his party without further scrutiny or analysis, they will not support the urban boundary growth project and the new growth areas tax.

Housing Industry Association Victorian Executive Director Gil King also stated that the proposed tax has a questionable distribution breakdown especially because around 50 per cent of it will be unnecessarily devoted to administration costs.

A report by the Melbourne City Council and the government showed that the cost of building new houses at Melbourne’s boundary is hundreds of millions of dollars more expensive than building in established suburbs due to the extra cost of planning and infrastructure. The report also states that building in established suburbs can be equated to savings of above $300 million for every 1000 housing units.

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