Throughout 2018, the Australian lending landscape changed a lot. An increase in wholesale funding costs saw lenders’ raise rates and a tightening of lending standards resulted in a reduction of applicant borrowing power. It was also revealed by the ACCC that opaque pricing on mortgage products sold by major lenders was stifling price competition.
These factors and more led to an increase in the number of Australians seeking the help of a mortgage broker when they decided to get a home loan.
A number of domestic and global economic factors would have played a role in the RBA’s first cash rate decision of 2019.
For example, the central bank in the United States, The Federal Reserve made the decision last week to hold their ‘cash rate’, the Federal Funds Rate at 2.25-2.50%.
At home, our nation’s inflation rate, a key measure the RBA uses to inform their monetary policy decisions has for some time, and continues to be below the RBA’s target range of 2-3%.
Encouragingly, according to the Australian Bureau of Statistics the unemployment rate was 5.0% in December 2018. At the same time, the Wage Price Index revealed a small lift in recent quarters but is forecasted to remain sluggish.
Furthermore, the latest National Australia Bank Monthly Business Survey revealed concerning results for business confidence and business conditions in December, continuing the downward trend over the second half of 2018.
Additionally, the Westpac Melbourne Institute of Consumer Confidence revealed a drop in confidence, which was attributed to falling house prices, disappointing updates on Australia’s economic growth, concerns about global trade wars and political uncertainty.
Another factor the RBA would be keeping an eye on, are the nation’s dwelling values, which recorded a 1.0% decline in January according to the CoreLogic Hedonic Home Value Index. This decline continues to be led by Sydney and Melbourne.
There is growing speculation in the market that the next cash rate move will be a cut. Regardless what the the RBA decides in coming months, borrowers should prepare sooner, rather than later. Whether you are switching from an interest-only loan to principal and interest, or coming to the end of a fixed-rate period, now is the right time to ensure you are getting a good deal.
The start of a new year is a perfect time to review your financial products, from your utility and service providers, to insurances and of course, any debt you have such as credit card, car loans and your mortgage. Ensuring that your financial products are still meeting your needs can go a long way to giving you peace of mind and safeguarding your financial wellbeing.
No matter what your home buying plans are this year, it’s important you establish a relationship with your local mortgage broker who can help you navigate an increasingly complex lending environment.