Our Interest Rates Really on Hold?

July 05, 2017
Mike Ponsonby

Over recent months so much has happened if you’re a home owner, investor or potentially becoming one of these two groups. You’d be safe to say the market has experienced the most amount of change in a number of years.

Are rates really on hold?

This week the Reserve Bank of Australia kept the official cash rate steady for a 10th straight meeting and signalled it won't be in any rush to join offshore banks in moving towards near-term interest rate hikes.

With the Reserve Bank of Australia leaving rates on hold again, you’d be right to think well maybe not much has changed? Not so, in fact the big four banks, along with many smaller lenders have been regularly raising rates for existing and new borrowers during a time when rates are supposedly on hold. If you have an investment loan(s) and or are a borrower who previously selected interest only repayments on your loan, there’s a better than good chance your interest rate has been rising and fast.

The flip side being many lenders are now offering lucrative interest rate discounts and cash and or cash rebates of $1,250 if your loan is owner occupied (i.e where you live) and you’re repaying your loan with principal and interest repayments. This means it can be a great time to shop around.

What’s driving the interest rate increases? Many of the actions undertaken for price increases have come at the request of various regulatory bodies who’ve stressed the need to slow down investor lending growth and to reduce the level of loans with an interest only repayment in place.

Are Sydney and Melbourne house prices still rising?

Depending on the local area you’re keeping an eye on, you may have recently seen a slowdown in either auctions clearance rates or prices for new purchases? Figures published by real-estate data company CoreLogic confirm the regulatory changes (as mentioned above) have assisted to deliver an early slow down to the nation's biggest property markets – Sydney and Melbourne – which entered 2017 rising at an annual pace of close to 20 per cent.

National property prices rose in the June quarter by just 0.8 per cent after surging more than 5 per cent in the first three months of the year, CoreLogic’s figures showed.

Did you say a new property tax?

From 1 July sellers of property worth $750,000 or more could face a 12.5 per cent tax on the proceeds under new ATO rules introduced to stop foreign property owners avoiding capital gains tax. To avoid the tax sellers need to provide a ‘clearance certificate’ issued by the Australian Tax Office to the purchaser on settlement of the sale to avoid the 12.5 per cent withholding tax.

This new tax and process applies to the sale of all Australian property including, vacant land, buildings, residential and commercial property options and leases.

If the property purchase price is $750,000 or more, it does not matter whether it is sold by an Australian or foreign resident so please be aware of these changes.

Hope for first home buyers!!

Also coming into force from 1 July was a number of great incentives to help first home buyers break into the property market which for many has been too great a challenge. In NSW for instance a first home buyer who purchases property to the a value of $650,000 will pay no stamp duty and then reduced stamp duty for purchase prices up to $800,000.

Finally, the last points are to always review your home loan and investment loan options. As you can see so much is happening and you may not be aware it’s even happening to you. A good rule of thumb is every 18 – 24 months think about:

  • Is my current loan still meeting my needs? Could I own my home sooner by switching to a different lender offering a lower rate but keeping my repayments the same?
  • Do I have a fixed rate loan or an interest only term that’s close to maturing and if so always assess your options and reach out for professional help and assistance.
  • Do I want to lock in part of my loan as a fixed rate and who would offer the best options aligned to my needs?

Your home and investment in property are important so it’s wise to invest the time to work out what’s best for you or you can always contact me.

Posted in: Interest rates

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