How to get a great home loan in this red-hot property market
With the property market running hot, mortgage lending is at historically high levels, according to the most recent data from the Australian Bureau of Statistics. Australians took out $28.6 billion of home loans in February – 1.8% lower than the month before but a massive 55.2% higher than the year before
With so much demand for home loans right now, the system isn't functioning as smoothly as it usually does. So here are my top three tips for getting a loan in the current environment:
Start early, because lenders are taking a long time to process applications
Shop around, because there are many great deals that aren’t being advertised or shown on comparison websites
Try hard to maintain a high credit rating, and fix any blemishes you might have
The great advantage of using a broker is you’ll be covered in all three areas. A broker will know all the hush-hush special deals, be able to advise you on maintaining your credit rating and manage the time-consuming application process on your behalf. Book a free Appointment
Borrowers and banking system in good health: RBA
Australians with mortgages significantly increased their financial buffers last year, according to Reserve Bank of Australia data. As the graph shows, indebted homeowners now have an average of four months worth of expenses in the bank. That compares to less than two months for renters and 10 months for people who own their home outright.
The average household doubled their savings rate last year, to 12% of income, according to the Reserve Bank. Those extra savings were used to pay down debt and/or increase financial buffers. At the same time, lending standards are “largely unchanged and remain robust”. In other words – borrowers have improved their individual financial positions while the banking system remains just as strong as before.
Government extends HomeBuilder construction commencement period
Were you one of the 121,000 people who took advantage of the HomeBuilder grant? If so, good news – the government has increased the construction commencement period, from six to 18 months. This is in response to unanticipated delays in the construction industry caused by Covid-related supply constraints. So even though grant applications are now closed, all applicants who signed contracts during the eligibility period, between 4 June 2020 and 31 March 2021, will receive this extension. HomeBuilder was designed to protect tradies’ jobs and stimulate the construction industry – and it was a spectacular success. Data from the Housing Industry Association shows a significant increase in new house sales since June 2020. That includes a 90.3% jump between February and March, as Australians rushed to take advantage of HomeBuilder before the program closed.
Households could save $126/yr thanks to falling power prices
Electricity prices have fallen almost 9% since the middle of last year, resulting in large potential savings for households in eastern and southern states. That's the finding of Australia's competition and consumer watchdog, the ACCC. Retail electricity offers now available to households in NSW, Victoria, south-east Queensland, South Australia and the ACT are, on average, 8.8% lower than in June 2020, which equates to an average annual household saving of $126. Wholesale electricity costs have fallen due to an increase in renewable generation and a decrease in fuel costs. The ACCC is encouraging households to shop around and switch to cheaper plans. That said, electricity retailers are required to pass on cuts in wholesale power costs, as per laws that were introduced in June 2020. Consumers in NSW, south-east Queensland, South Australia, Tasmania and the ACT can use Energy Made Easy to compare offers. Victorian consumers can use Victorian Energy Compare.
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