Today’s cash rate decision can be attributed to a number of economic factors.
On a global scale, major economies continue to experience above-trend growth. At home, we continue to see dwelling values fall across the country with the two largest housing markets, Sydney and Melbourne experiencing falls of 0.3% and 0.6% respectively and national dwelling values fell for the 11th consecutive month in August.
Inflation has also come in under the RBA board’s target range.
Despite a stagnant cash rate, the interest rates charged on home loans are rising.
Last week, a major lender announced they would raise rates on their variable home loan products by up to 14 basis points in a bid to offset rising wholesale funding costs. History tells us that other lenders are likely to follow suit.
Home loans are taking longer to progress from application through to settlement and lenders are conducting a more thorough analysis of home loan applicants’ monthly living expenses, requesting forensic detail on as many as 15 expense categories including clothing, entertainment, medical, transport, education, childcare and more.
Lenders will ask to see a minimum of three months’ worth of spending which allows them to determine an applicant’s ability to service a loan. Some home loan applicants are having to justify their expenses in certain categories and are being told that they need to change their spending behaviour to increase their chances of getting a home loan.
For this reason, it is important that anyone who is looking to apply for a home review their spending habits and make a personal commitment to getting financially fit.
If you are looking to buy, you should seek professional advice from a qualified financial adviser and mortgage broker who can work together to help you put your best foot forward before submitting a loan application.