» Interest Rates

Everything you need to know about interest rate cuts

BMT team — Thu, 03 Oct 2019 00:17:09 +0000

The Reserve Bank of Australia (RBA) made history in the first week of October, slashing the official interest rate and signalling further cuts in the coming months. What is the current interest rate? The RBA dropped the official interest rate to just 0.75 per cent on Tuesday, 1 October. The first time the official cash rate has dropped below 1 per cent in Australia and the third rate cut since June. Interest rates are significant in affecting the economy, which is why the RBA’s decision is so important. If interest rates are lower, it’s likely to encourage more people to take out a mortgage and purchase a property or take out a loan for home renovation. Why did the RBA drop the interest rate? In a statement issued after the call, the RBA said they made the decision to lower the rate in a bid to revive consumer spending, lift Australia’s otherwise stagnant wage growth, drive employment and provide greater confidence that inflation would be consistent with the medium-term target. RBA Governor, Phillip Lowe also noted trade conflict between the United States and China as a contributing factor. “While the outlook for the global economy remains reasonable, the risks are tilted to the downside. The US–China trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans because of the increased uncertainty,” Lowe said in the statement. “At the same time, in most advanced economies, unemployment rates are low and wage growth has picked up, although inflation remains low. “Interest rates are very low around the world and further monetary easing is widely expected, as central banks respond to the persistent downside risks to the global economy and subdued inflation.” Have the banks passed on the current interest rate? So far, the big four banks have baulked at passing the official interest rate cut in full to consumers. Both the Commonwealth Bank and National Australia Bank (NAB) defied the RBA by refusing to pass on the cut in full just hours after the decision. The Commonwealth unveiled its mortgage rate changes, withholding 12 basis points from borrowers. Treasurer Josh Frydenberg blasted the two banks for failing to pass on interest rate cuts in full, saying it was “very disappointing” and that “customers should vote with their feet.” Reduce Home Loans cut interest rates by 0.20 per cent with the lowest variable rate currently at 2.69 per cent. Homestar Finance and Athena Home Loans both dropped 0.25 per cent, with variable rates at 2.74 per cent and 2.84 per cent respectively. Will there be further rate cuts? The RBA has suggested that another rate drop is expected to take place if the economy remains subdued, however when this might occur remains unclear. “It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target,” Lowe said. “The [RBA] Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.”

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Property market update July 2019

BMT team — Thu, 04 Jul 2019 04:09:45 +0000

Property values Sydney and Melbourne housing market conditions continued to improve in June, despite dwelling values still trending lower nationally, according to CoreLogic’s June 2019 Home Property Value Index. Interest rate cuts and renewed confidence in the property market are having a flow-on effect for conditions across the country. CoreLogic recorded a 0.2 per cent fall in national dwelling values, the smallest month-on-month decline since March 2018. Sydney saw an uptrend in dwelling values of 0.1 per cent, marking the first monthly increase in the city since July 2017. In addition, Melbourne recorded a rise of 0.2 per cent, the first move since November 2017. Hobart was the only other capital city to record an increase (0.2 per cent) in dwelling values. Despite strong growth over the past few years, Hobart experienced a 1.1 per cent fall over the three months leading up to June. Outside of Hobart, regional Tasmania proved strong, increasing by 1.3 per cent for the quarter. This is contrary to the general trend among other regional areas where dwelling values are losing momentum. Darwin experienced the biggest decline in housing values, falling by 0.9 per cent over June and 3.6 per cent over the quarter. Perth also continued its weaker trend, with a monthly decline of 0.7 per cent in June and 2.1 per cent over the quarter. Adelaide fell by 0.5 in June and 0.4 per cent over the quarter, marking the smallest decline amongst the capital cities. Brisbane slipped by 0.6 per cent and Canberra by 0.9 per cent. Residential listings National residential property listings fell by 5.8 per cent in June while year-on-year listings declined by 1.8 per cent, according SQM Research. Listing numbers in Sydney experienced the highest decline, falling by 10.8 per cent over the month and 9.8 per cent from the same time last year. Melbourne wasn’t far behind, recording a 10.7 per cent decline over June. Other declines included Hobart (9.4 per cent), Canberra (9 per cent), Adelaide (5.2 per cent), Perth (5.1 per cent) and Brisbane (4.4 per cent). Darwin recorded the lowest fall in listings at 1.3 per cent. Seasonally, it’s not unusual for listing numbers to fall throughout winter. With colder weather and falling housing prices, many vendors are waiting longer to sell. The Reserve Bank of Australia’s additional rate cuts could see an upward trend in listings throughout July. Vacancy and rental rates National rental rates remained relatively unchanged in June, tracking 0.3 per cent higher for the quarter and 0.4 per cent higher for the financial year. Despite sluggish conditions capital cities are starting to see rental rates rise faster, while those experiencing weakening are seeing the pace of decline ease. Hobart continued to lead the charge for rental rate growth after recording a 4.7 per cent monthly increase. With Hobart’s rental rates outperforming dwelling values, gross rental yields are continuing to push higher. Darwin was on the other end of the property spectrum, tracking the largest yearly fall of 4.7 per cent. Gross rental yields across both combined capital cities and combined regional areas rose from record lows, signalling that the property downturn may be over. Auction clearance rates National auction clearance rates got off to a slow start in June with the Queen’s birthday long weekend returning an average preliminary auction clearance rate of 51.3 per cent. However, the housing market surged back to life mid-month with CoreLogic recording a preliminary national clearance rate of 66.4 per cent from almost 1,500 auctions. The winter auction market continued to warm as more than 60 per cent of listed properties were sold under the hammer nationally for three consecutive weeks. According to CoreLogic, both the Sydney and Melbourne markets consistently recorded preliminary rates of above 60 per cent. This is a substantial improvement relative to late 2018 where rates were holding in the low 40 per cent range. While Sydney and Melbourne auction clearance rates have kept up their post-election energy, low auction volumes are likely to weaken the market pulse if house prices remain flat. Finance and interest rates The Reserve Bank of Australia (RBA) has cut interest rates for the second time in two months, reducing the official cash rate to a record low of just 1 per cent. The unprecedented move to further reduce rates follows on from the RBA’s decision to drop rates to1.25 per cent at the beginning of June. In an attempt to kick-start the economy and drive unemployment lower, the 25-basis points reduction marks the first time the RBA has delivered back-to-back cuts since 2012. In the statement accompanying the decision, RBA governor Philip Lowe indicated rates could be pushed even lower if the jobless rate didn’t fall fast enough. This mirrors several predictions that the official rate will fall as low as 0.75 per cent by the end of 2019. Treasurer Josh Frydenberg said the government expects the banks to pass on the full rate cut to borrowers. Along with interest rate cuts, CoreLogic said housing finance data and credit aggregates have caused a slowdown in investment lending. Investor credit has increased at an historically slow rate of 0.6 per cent.

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Property market update – February 2017

BMT team — Wed, 08 Feb 2017 23:05:06 +0000

Property values 2017 kicked off with continued growth in house prices according to CoreLogic’s Home Value Index. Combined capital city dwelling values increased by 0.7 per cent in January and as a result, values are 10.7 per cent higher than this time last year. Over the three months to January, it was Hobart which surprising led the capital cities in terms of the greatest increase in values. Tasmania’s capital saw dwelling values increase by 5.8 per cent, reaching a median dwelling price of $366,000. Sydney and Melbourne continue to be consistent performers in terms of dwelling price growth. Over the three months to January values rose by 2.7 and 2.4 per cent respectively in these cities. The current median dwelling price for Sydney is $850,000 while in Melbourne it sits at $640,000. Darwin was the only capital city where dwelling values experienced a fall, declining by 1.7 per cent during the month of January to a median dwelling price of $490,000. Residential property listings The latest data from SQM Research indicates that the number of residential property listings available fell during the month of January. According to the report, the biggest drop was experienced in Sydney and Melbourne, where listings declined 6.6 and 12.3 per cent during the month respectively. Nationally, there was a 3.0 per cent decrease in the number of residential properties listed. The only capital city which experienced an increase in listings over January was Darwin, with a 1.5 per cent increase. Auction clearance rates Despite the slowdown in residential property listings reported by SQM Research, the latest CoreLogic auction clearance rates indicate that the market will gather momentum after the seasonal holiday slowdown. Already there has been an increase in the number of auctions across the capital cities over the past week, with 867 auctions reported for the week ending the 5th of January compared with just 368 auctions during the previous week. From the 867 auctions tracked, CoreLogic reported a preliminary clearance rate of 70.8 per cent, down slight from the 71.6 per cent recorded for the last week of January. Rental rates Figures from the latest SQM Research Weekly Rental Index for the week ending the 4th of February show that over the month of January weekly rents for houses decreased by 1.4 per cent whilst weekly rents for units increased by 0.3 per cent. Of the capital cities, Canberra and Hobart led the way with the most significant increases in weekly rents for houses and units. Canberra experienced a 2.2 per cent increase in house rents and a 0.4 per cent increase in unit rents while Hobart saw a 2.3 per cent increase in house rents and a 0.7 per cent increase in unit rents over the month. Asking rents for Sydney houses increased by 0.2 per cent over January. However, the New South Wales capital city also saw a decline in asking rents for units of 0.2 per cent. No other capital cities experienced a decrease in weekly rents during the month. However, the asking rents for Darwin, Brisbane and Adelaide units experienced no changes when compared with the previous month. Rental vacancies The most noteworthy news regarding vacancy rates reported recently were figures reported by the Property Council of Australia. According to the Property Council’s Office Market Report, there was a slight lift in office vacancy rates from 10.5 to 10.4 per cent. The Australian Central Business District (CBD) office vacancy rate has remained steady over the six months to January 2017, falling from 11.0 per cent to 10.9 per cent. Demand for office space has been strong in all capital cities and particularly in Brisbane, where the Property Council reported that office space in the city CBD is now more than five times higher than historical levels. The Sunshine Coast and the Gold Coast office markets have also recorded sharp declines in vacancies, with the two cities now sitting at 6.9 and 12.2 per cent office vacancy respectively. Sydney and Melbourne CBD’s continue to demonstrate a strong office market performance, with vacancy rates of 6.2 and 6.4 per cent respectively. Building approvals The Australian Bureau of Statistics (ABS) released the latest buildings approvals data for December 2016 in February. According to the report there were 17,327 dwellings approved in December, a fall in approvals of 1.2 per cent when compared with the previous month in seasonally adjusted terms. The drop follows a 7.5 per cent jump in approvals reported in November and the numbers of dwellings approved is 11.4 per cent lower than the same time one year ago. Finance and interest rates At the first board meeting of the year by the Reserve Bank of Australia (RBA) it was decided to leave rates on hold at 1.5 per cent. The decision was widely anticipated after all seventy two Economists surveyed by Reuters indicated they expected the cash rate to stay put. Despite record low interest rates, property investors may continue to face difficulties with new loan applications and requests to refinance. Just yesterday Commonwealth Bank subsidiary, Bankwest, announced it has again tightened their lending policies for property investors.

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Property market update – October 2016

BMT team — Fri, 07 Oct 2016 01:00:50 +0000

Property values For the month of September, a 1 per cent rise in home values was recorded according to the latest CoreLogic Hedonic Home Value Index. Sydney remains the capital city with the highest median dwelling price, currently sitting at $785,000, followed by Melbourne with a median dwelling price of $590,000. Of the two cities, Melbourne experienced the most growth in dwelling values, increasing by 2.3 per cent. Sydney dwelling values increased by just 0.8 per cent, however the city has seen a massive 10.2 per cent growth year on year. Of the capital cities, Canberra was the surprise package during September, outpacing both Sydney and Melbourne with an increase in dwelling values of 2.4 per cent during the month. The city has also experienced growth of 9 per cent over the past year. The median dwelling value for the city is currently sitting at $556,800. Perth and Darwin continue to experience falls in median dwelling values, dropping -2.5 per cent and -2.2 per cent respectively over the month of September. Rental vacancies The latest figures from SQM Research have revealed that vacancy rates during August 2016 have dropped to 2.3 per cent from the previously reported 2.5 per cent recorded during July 2016. All of the capital cities vacancy rates dropped during August, which helped to drive up rents particularly in Sydney and Melbourne where vacancy rates were below 2 per cent (sitting at 1.7 and 1.9 per cent respectively). The total number of vacancies across the country during August was 73,451. Hobart was the capital city with the tightest vacancy rates during the month of August, sitting at just 0.5 per cent. Rental rates According to SQM Research’s weekly rental index, the asking rent for a three bedroom house in Sydney has jumped 4.8 per cent over the past twelve months to $713 per week. Melbourne has also experienced a 3.4 per cent jump in rents over the past twelve months, with the average three bedroom house costing approximately $486 to rent per week. Both cities experienced an increase in weekly rents for units of 4 and 4.5 per cent respectively. Decreases in average rents for both houses and units were experienced by Perth and Darwin. There was been a -9.8 per cent decrease in weekly rents for houses and -11.4 per cent for units in Perth over the past twelve months, which is due in part to the downturn of the mining sector. Darwin has experienced a -1.5 per cent decrease in weekly rents for houses and a -5.5 per cent decrease in weekly rents for units over the past twelve months. Building approvals The Australian Bureau of Statistics released the latest building approvals data for August 2016 this week. While the data showed that overall residential building approvals slowed during August, down by just -1.8 per cent, the number of approvals (20,788 dwellings) is 10.1 per cent higher than during the same month last year. Of the 20,788 dwellings approved, 9,475 were houses and 11,313 were units. Units are continuing to prove to be popular as over the past year on more than seven occasions, there were more than seven months where dwelling approvals for residential units outpaced the number of dwellings approved for residential houses. Finance and interest rates More than fifty seven Economists polled by Reuters who expected the cash rate to remain on hold at 1.5 per cent were correct when the Reserve Bank of Australia (RBA) delivered their decision at the board meeting on Tuesday the 4th of October. While continued low interest rates will help first home owners and property investors to enter the market, housing finance data from the Australian Bureau of Statistics (ABS) released on the 9th of September suggests there has been a decrease of -1.8 per cent in the total value of mortgage lending. During July the total value of mortgage lending was $31.8 billion according to the report, down from 32.4 billion during June and $33.2 billion when it peaked during April 2015. Auction clearance rates There was less stock available on the market for the final weekend of September as most recognised that potential home buyers and property investor’s focus would be on watching the results of the AFL and Rugby League grand finals. However, of the 437 auctions reported in Sydney, there was a preliminary clearance rate of 83.8 per cent. In Melbourne, there were just 111 auctions held last weekend, the lowest recorded since the week ending January 24th 2016, and a preliminary clearance result of 92.8 per cent. This is the highest clearance rate Melbourne has recorded this year. Brisbane recorded a preliminary clearance rate of 47.9 per cent from just seventy one auctions recorded and of the five auctions held in Tasmania this week, there was just one successful sale.

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Interest rate prediction 2016/17

Chan Naylor Team — Fri, 08 Jul 2016 07:11:57 +0000

Why are US interest rates going up and Australian interest rates coming down? If the USA sneezes, Australia and the World catches a cold. History has shown that the US economy was the lynch pin to the world’s economy and generally Australia followed suit. If this was the case, then why is the US Federal Reserve considering interest rate rises when the Australian reserve bank is predicting lower interest rates? Especially when you compare the economic Data which shows both economies performing at a similar pace….at least it appears that way on the surface. Economy growth rates US = 3.25 per cent Australia = 3.1 per cent Unemployment rates US = 4.7 per cent Australia = 5.00 per cent Interest rates US = 0.25-0.5 per cent Australia = 1.75 per cent Consumer price index US = 1.1 per cent Australia = 1.3 per cent Let’s dig a little deeper According to reports from the US they are as close to full employment as they have ever been … the unemployment rate of 4.7 per cent is the lowest since 2007. Australia currently sits at 5 per cent but an ageing population and the retirement of the baby boomers is reducing the participation rate in the workforce and the end of the resources boom has led to a sharp slowdown in population growth thanks to fewer migrants arriving on 457 visas. According to the Australian Bureau of Statistics (ABS) this has reduced our annual population growth rate from 2 per cent to 1.4 per cent. Slower population growth and slower participation growth reduces the potential for growth. Americans are spending more according to Federal Reserve reports. In April consumer spending rose at its fastest pace since 2006 with higher levels of consumer confidence. The economy is predicted to grow by 2.5 per cent in the second quarter with an annualised 3.25 per cent growth rate. In Australia consumer spending remains subdued, the construction and renovation of houses is contributing to our growth numbers, business investment and confidence continues to fall sharply as mining companies shelve any expansion plans. Non-mining firms have also proven extremely reluctant to invest, a key threat to future growth all contributing to the Australian economy growing a lot slower than the US. Property A Reuters poll recently showed US house prices are forecast to rise at more than double the current rate of underlying consumer prices and wages over the next few years, underpinned by steady and solid turnover in the housing market. While housing affordability is getting worse for first-time buyers, most analysts and economists polled by Reuters say that rents are even more prohibitive, which should prompt more young people who can manage to do so to buy their first homes. So while few expect a major boost to economic growth from the housing market, it is currently on a strong enough footing to withstand the Federal Reserve’s plans to gradually raise interest rates, which will also increase mortgage costs. The ABS published month-over-month building approvals data for April on May 31, 2016. Building permits saw a steady rise of 3.0 per cent, much higher than the forecast for a fall of 3 per cent. Housing has been a significant variable in this cycle principally because it has also generated a lot of jobs. But with signs that the volume of new houses and units coming into the market is starting to run ahead of demand, the capacity of housing investment to continue to underpin growth is questionable. Affordability is still a concern and with recent discussion around negative gearing changes, many experts believe the Market will at best stabilise and in some areas retract. What does this mean to mortgage holders? Just because the US increases interest rates there is no need to panic about potential increases in Australia. Without drilling down into the economics it’s clear that we are more closely aligned with Asia. The movement from a mining and resource driven economy to other areas will take some time and in the short term has taken the gloss off our economy. US rates have been low for a long period and will need an upward adjustment because their economy is performing well (bear in mind that our current base rate sits 1.25 per cent above the US rate which gives the Reserve Bank room to move downwards if necessary. With the outcome of the election still being counted and uncertainty about our economy, don’t expect Australian interest rates to follow the US trend. For further information about how Chan & Naylor can help assist you visit www.chan-naylor.com.au or phone 1300 250 122.

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Which home loan lenders will issue a rate cut and when

Bessie Hassan — Thu, 12 May 2016 05:26:46 +0000

It’s been one week since the Reserve Bank decided to trim the cash rate to a historic low of 1.75 per cent, and with just thirty eight home loan lenders announcing a rate change since the board meeting (03/05/16), a large proportion of the market have not made a move and are keeping their cards close to their chest. According to the finder.com.au database, which comprises seventy four lenders, thirty eight lenders including the big four banks, have made announcements regarding variable rate cuts to owner-occupier home loans. However, nearly half (49 per cent) are yet to communicate a change. A total of twenty six lenders have honoured the full 0.25 per cent rate cut, while twelve have not. Some of the lenders that did not issue the full rate cut include ANZ which reduced its standard variable rate by 0.19 per cent and ME Bank who announced a rate cut of just 0.05 per cent. It’s surprising that nearly half of the market has not made an announcement regarding their stance on rate changes, so you need to be proactive. If you haven’t heard from your bank, get in touch with them directly to find out what’s going on. You can also monitor the media section of your lender’s website as your lender will most likely issue a statement in the days to come. Additionally, if you’re not satisfied with your lender’s decision or if your lender isn’t providing the full rate cut, then you may want to refinance your home loan to opt for a better rate. In a low interest rate environment, a new benchmark has been set so you can secure rates under 4.0 per cent if you’re prepared to do some groundwork. For the majority of lenders, the new variable rate becomes effective towards the end of this month, while a total of ten lenders will introduce the new rates prior to 20 May 2016. However, two lenders are not passing on the new rate until June including Your Credit Union and Australian Military Bank. A borrower can pocket approximately $67 each month or $805 each year on a standard $500,000 home loan with a lender that provides an average rate cut. You can stay up to date with rate announcements and changes here. Bessie Hassan is the money expert at finder.com.au which is one of Australia’s largest comparison websites.

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Statistics say it’s now easier to own an investment property

Bradley Beer — Fri, 06 Sep 2013 01:29:54 +0000

During Money Smart Week every investment property owner wants to hear good news about the proportion of their income that will be required to meet loan repayments. The latest Adelaide Bank and REIA Housing Affordability report shows that housing affordability has improved over the past two years, with the proportion of income required to meet repayments at 28.7%. This is the lowest recorded drop since the June quarter of 2003. This is in part due to the low interest rates set by the Reserve Bank of Australia, which remained unchanged this week at a historical low of 2.5%. Variable interest rates have also declined 0.2 percentage points from 6.1% to 5.9% in the June quarter, which is a decrease of 0.7 percentage points compared with the same time last year. While we’re on the subject of how much money is required to meet loan repayments, if you’re considering purchasing a new investment property – why not also make a smarter investment choice by requesting a tax depreciation schedule for your property? Claiming depreciation can make a significant difference to the available cash flow. The money claimed can also assist you with loan repayments. Make sure you crunch the numbers and get an estimate of how much depreciation deductions you can claim. Read more: Crunch the numbers and save

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