Lockdowns a knock to confidence

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Lockdowns a knock to confidence

Republished from MPA.

The nation’s lockdowns are taking their toll on new home lending and the financial comfort of Australians. While the RBA remains positive, there are still concerns about the economic recovery.

The value of new home lending in Australia dropped for the first time this year in June, coinciding with the start of Sydney’s lockdown. Declining 1.6% over the month, it was driven by a 2.5% drop in owner-occupier lending – the largest fall since May 2020.

Investment lending bucked the trend, with the value of new loans to investors growing for the eighth consecutive month, rising by 0.7% in June to reach $9.19bn.

First home buyer purchases and loans for construction slowed over the month as incentives were wound back.

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30,000 new housing grants released - do you benefit?

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30,000 new housing grants released - do you benefit?

On the 1st of July, the Australian Government made 10,000 new places available under the First Home Loan Deposit Scheme, the New Home Guarantee and the Family Home Guarantee, respectively.

This totals to 30,000 new scheme places released to support Australians buying a home. Under the First Home Loan Deposit Scheme and the New Home Guarantee, you can purchase a property with a deposit of as little as 5% without paying lenders mortgage insurance (LMI), which would be typically required for deposits under 20%.

The newly announced Family Home Guarantee lowers the deposit required to 2% without paying LMI for single parents with dependent children, regardless of whether or not you’re a first home buyer.

This is because the federal government guarantees the remaining value of a 20% deposit to the participating lender. There are over 30 participating lenders in the scheme through whom the scheme places are made available.

These spots are likely to be filled within a matter of months – so if you’re interested, it’s a good idea to reach out to your mortgage broker soon. But first, make sure that you meet the eligibility criteria below.

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Six factors affecting property market growth

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Six factors affecting property market growth

In March, the Australian housing market hit its fastest national growth rate in capital gains since 1988. Record low interest rates, heightened consumer confidence due to overperforming economic recovery, and Government stimulus measures such as the First Home Loan Deposit Scheme have spurred demand.

But there are also factors that indicate that this growth is at its peak. A continued boom is unsustainable, and markets are inherently cyclical. According to property market research firm CoreLogic there is unlikely to be a dramatic decrease in the housing market, but that its growth will slowly taper in the next few months – a change that is indicated by the following factors.

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The current property boom highlights a disparity amongst Australians

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The current property boom highlights a disparity amongst Australians

With the start of 2021 came an unprecedented growth in property prices, mortgages, and auctions. Several factors such as record low interest rates, decreased spending on recreation and holiday due to COVID, and government incentives spurred movement in the housing market, as Australians took the opportunity to invest in property.

In July, housing values in Australia increased by another 1.6%, bringing housing values to 14.1% higher over the first half of 2021, and 16.1% higher over the past year, as reported by CoreLogic. Australia’s property market has not seen this pace of annual growth since February 2004.

A combination of record low interest rates and active listings at approximately -26% below the five-year average in contrast to dwelling sales which have reached 40% above the five-year average has contributed to the property boom.

Increased housing values have allowed existing property owners to reap benefits, while despite lowering interest rates, prices soar out of reach for some looking to get in the market.

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First Home Loan Deposit Scheme Update

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First Home Loan Deposit Scheme Update

The federal government has recently announced that they will reissue unused guarantees from the 2019-2020 financial year from buyers who were unable to complete the purchase of their first home under the First Home Loan Deposit Scheme (FHLDS).

This opens up 1,800 opportunities for first home buyers to purchase a home under the scheme. Of the 27 participating lenders, so far NAB and Commonwealth Bank have announced that additional places will be available under them.

If you’re in the process of purchasing or building your first home, it’s a good idea to check whether you are eligible for the scheme.

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