Interest rates aren’t expected to rise anytime soon

Lucy Dean writes for Yahoo Finance in “When will interest rates start to rise again?”:

According to Deloitte Access Economics partner Chris Richardson, mortgage-holders have a while until they need to worry about rising rates. 

“Globally and locally, interest rates will be nailed to the floor for years,” he said in Deloitte Access Economics’ quarterly business outlook report. 

More agreement follows:

AMP Capital chief economist Shane Oliver said rates will stay on hold for “at least” another three years, while ABC Bullion’s Nicholas Frappell said Australians shouldn’t expect an increase until at least 2022. 

The article then has a big section on how “many Australians aren’t taking full advantage” of the low interest rates. It’s only to be expected as most of us have other things on our minds right now. Mortgage repayments are a huge bill though and it’s definitely a good time to take a look around the market.

Steve Mickenbecker, Canstar’s finance expert said:

“If you know your home loan interest rate is too high, now is the time to put the knowledge into action. We’ve never seen a home loan market like we have now where lenders are so keen to undercut their competitors’ rates.”

I couldn’t agree more. Banks are competing hard amongst themselves right now. The easiest way to figure out if you can do better is to get in touch.

National Auction Results June 2020

Auction results generally give us an idea of whether the property market is strong or weak. It’s good to see that the auction clearance rates are doing well now that bans on auctions and inspections have been lifted. There’s definite interest from buyers.

The following auction results around Australia were initially reported by Domain on 27th of June and updated on the 29th.

Sydney 65%

Melbourne 60%

Adelaide 72%

Brisbane 52%

Canberra 89%

As 36 suburbs in 10 postcodes in Melbourne go back into lockdown due to the recent uptick in cases, I’d expect some impact on Melbourne results for July.

How the pillars of the property market are faring

Interesting take by Cameron Kusher for Realestate.com about the foundations of our property market in “A look at what supports the Australian property market amid fears of a collapse”.

1. Employment

New figures from the Australian Bureau of Statistics revealed Australia’s unemployment rate jumped to 7.1% in May from 6.4% in April – its highest level since October 2001.

The JobKeeper wage subsidy is likely contributing to lower participation rates but with the scheme set to expire in three months’ time, unemployment could soon shift higher as people start looking for work again.

2. Population growth

The population increased by 349,833 people in 2019 – its smallest annual increase since the 12 months to December 2015 and its slowest rate of growth since June 2006.

With international borders now closed due to COVID-19, population growth will likely be hampered even further, which will likely lead to reduced overall housing demand in the coming months.

3. Consumer confidence

Consumer confidence fell dramatically as Australia entered COVID-19 lockdowns, but according to the ANZ-Roy Morgan Weekly Consumer Confidence Index, confidence has rebounded significantly since the introduction of the JobKeeper program and mortgage repayment holidays from the banks – now sitting slightly lower than it was before COVID-19 lockdowns began.

This marks a rapid recovery in consumer confidence, especially when you consider how quickly the virus was spreading as the country entered lockdowns.

HomeBuilder is off to the races

An interesting data point from Eliza Borrello for ABC News in “Can HomeBuilder be used as a deposit? Questions leave prospective house buyers confused”. After less than a week since HomeBuilder was announced:

… more than 208,000 people had visited the Federal Government's HomeBuilder webpage and more than 15,600 Australians had registered an interest.

It’s off to a good start as the government had expected 27,000 Australians to apply for it.

There’s also a bit of useful information addressing whether the $25,000 HomeBuilder grant can go on a deposit:

NAB:

The ABC understands NAB customers will be able to put HomeBuilder grants towards a deposit, but the total deposit required will not change.

ANZ:

An ANZ spokesman said the $25,000 could be used as part of the equity a customer contributed to building costs, as long as a loan was not subject to lenders mortgage insurance (LMI).

LMI is insurance borrowers have to take out if they have not saved a 20 per cent deposit for their home.

CBA and Westpac didn’t respond with clear guidance. So right now, the quick answer is that it depends on the lender with many still figuring out how to work it into their lending criteria.

Government grants for first home buyers - state by state

Great read for first home buyers by Ellen Lutton in “This is how much money the government is giving first-home buyers to buy or build new, state by state” for Domain. Here’s a summary for NSW and VIC:

NSW – $35,000

On top of the new HomeBuilder grant of $25,000, NSW first-home buyers already have access to a $10,000 grant for new properties costing less than $600,000 and owner-builder/building contracts worth less than $700,000.

If you’re buying land to build a new home, the total price – including the land and home – must be no more than $750,000. 

There is also no stamp duty payable on property under $650,000, or vacant land under $350,000, while properties between $650,000 to $800,000, or vacant land between $350,000 to $450,000 get discounted stamp duty.

Victoria – up to $45,000

Victorians already had a $10,000 grant available for new first homes, and $20,000 for new homes built in regional areas, valued at $750,000 or less. They also don’t pay stamp duty on property under $600,000, with discounted stamp duty applying on property between $600,000 to $750,000.