The latest from Integrity Finance Australia
Continuing to be a major story - Property owners are happy! House prices are booming. So much for ‘expert’ predictions of a 40% collapse!
Interest rates at 2% are a major driver. Despite low wages growth, housing interest payments have dropped from over 10% of income, to now only being 5% of income, the lowest since 2002. Affordability of repayments is no longer such a problem.
As the vaccine is rolled out and Australia recovers from the recession, 2021 has started out as the year of the home buyer. Have you re-assessed your position?
Ironically the Covid-19 lock down has increased savings levels across Australia. That has for many potential home buyers increased their available deposit.
Some media outlets screamed ‘it will cause another financial meltdown akin to the GFC’ following recent Federal Government announcements to curb responsible lending laws.
I have been asked by many clients for my thoughts on this, from my position as a professional accredited credit advisor acting in-between the bank and customer in support of the customer.
The truth is we need responsible lending rules and legislation. There are many vulnerable members of society who will take credit offered to them with insufficient consideration of the consequences, or of their ability to repay the debt.
But is the existing legislation pushing too far?
As the Victorian economy struggles through the Coronavirus shutdown, one question keeps coming up: Are property prices about to crash?
Of course there are always the doomsday headline seekers. Professor Steve Keen has been predicting a 40% fall in Australian house prices “within 5 years” since the GFC in 2008. He is infamous for having bet on it happening. Which he lost, subsequently walking from Canberra to the top of Mt Kosciuszko as his ‘punishment’.
In Victoria, these crazy times make us all feel like we are in a movie, perhaps a futurist dystopian drama, or perhaps a little like JAWS 2, with COVID-19 replacing the shark?
‘It seemed we had everything under control. For a time. But nature cannot so easily be controlled: Not only did the danger return, it is worse.’
As in that movie we see our leaders needing to walk the tightrope, in a balancing act between safety and the economy. Each decision made is critical.
It is not that long ago homeowners were paying 17% on a home loan. It was a very different time to what we face now.
The RBA cash rate is at record lows, and the Reserve Bank has stated it cannot and will not drop it below the current 0.25%. We have now also seen the introduction of Quantitative Easing (QE) in Australia, sending Fixed Rate loans down below 2.20%
Small wonder refinancing has surged to over 70% of loan applications!
Using dual income purchasing power to borrow more money is standard practice, and is part of the reason for the dramatic increase in house prices over the past 30 years. Most young couples purchase a home together, with joint incomes taken into account to be able to afford ongoing home loan repayments.
