Servicing Melbourne, the Mornington Peninsula and wider Victoria
Roller coaster ride - or a flat seas ahead?
In this edition I have looked at the interest rate debate and the First Home Buyers scheme and hope to clarify a few misunderstandings that we are hearing in the media.
I hope you enjoy this edition of The Flash!
Regards,
Adrian Williams
July 2009
Issue 05
Lightning Fast Home Loans - 500 Victoria Parade, East Melbourne 3002
Tel: (03) 9417 4918 Fax: (03) 9417 4921
Another RBA Interest Rate Cut ….. What Now?
Given last April’s 0.25% decrease in the official cash rate by the Reserve Bank has led to various ‘expert’ comments that range from it being the last cut in rates in the cycle to it being a cautious approach by the RBA prior to further rate reductions later in the year, it is clear that the future is now unclear and thus borrowers probably do need to take stock of their current situation. One positive aspect of the debate is the general acceptance that there is no imminent upswing in the interest rate pipeline, so the current relatively low variable rates will remain for a while.
A major discussion point that has arisen since the RBA announcement has been the decision of the major banks to not pass this rate cut on in full (or at all in some cases) to their customers, citing continuing high costs of funding as their justification. However there have been some conflicting reports about this also, and it may well be that the banks are using the opportunity to reinstate better margins on their lending that were once available before the emergence of the non-bank sector as strong competition over the past 10 years. Whatever the circumstances, we have to work within the realities of the market at this point and, at Lightning Fast Home Loans, we are intent on offering you the very best advice possible, while always respecting your ultimate right to determine any decision taken. So, despite not having the proverbial crystal ball and this not being able to give any guarantees, we feel the following comments are worthy of consideration:
- While our advice over the past 12 months has been for clients to be very careful about entering into any fixed rate loan agreement, it may be time to review your situation and see what is available either with your current lender or another – if a particularly suitable deal is available and suits your circumstances. Essentially, we feel that short term stability of variable rates necessitates that any fixed rate option being considered now should provide at least a 3 year period where benefits can be obtained.
- Many lenders are continuing to tighten their credit policy parameters, with many reducing their maximum lending ratios to 90% of the security offered. If you think you might need to use more than a 90% loan to finance (or refinance) a property, then it would be worth investigating this soon, before any more options ‘dry up’.
- Most lenders are including the requirement for borrowers to have evidence of “genuine savings” of up to 5% of their intended purchase price. What constitutes genuine savings varies among lenders, but it would be good to have 5% in a bank account in your own name for 3 months at the time of any application. If, for instance – as many of our First Home Buyer clients do – you are relying on a ‘family gift’ to meet some of the costs of a proposed purchase, it would be advisable to actually get these funds into an account in the borrower’s name/s 3 months in advance of any application so as to meet the genuine savings requirements. If you need information about other ways to meet the genuine savings condition, please call us at Lightning Fast Home Loans, as we would be pleased to provide further advice.
- Where possible, consider using one of the non-major bank lenders for your borrowing requirements; while we still offer an extensive range of lenders including all the majors) on our panel, it is becoming abundantly clear that the increased focus on only the major banks is starting to result in a number of adverse outcomes associated with diminished competition. While we shall always provide a range of options to clients that include the majors, with a commitment to ensuring you do get the best option available, we believe that the more competition in the market that exists, the better off all customers will be in the future.
First Home Buyers’ bonus increases … for some!
The first home buyers’ bonus, paid by the Victorian State Government as part of the overall FHOG assistance has more than doubled to $11,000 for Victorians buying a new home, but buyers of existing homes have lost out slightly.
As of July 1 the bonus for existing homes decreased by $1,000 to $2,000.
For newly constructed homes the bonus rose from $5,000 to $11,000, while regional new home buyers will now receive an added $4,500, up from $3,000.
The bonus is in addition to the $7,000 federal government First Home Owners Grant.
That federal grant was boosted by $7,000 last year on existing homes and by $14,000 for new homes, but this ‘Boost’ is due to halve on September 30 this year and expire completely on December 31st 2009.
The obvious impact of these announcements for First Home Buyer incentives is to reward those who can act before September 30th in particular, especially those who build or buy a brand new home as they will receive $32,000 in total funding in the Melbourne metropolitan region and up to $36,500 in Regional Victoria.
SRO table, which sets out the different amounts that first home buyers in Victoria may be eligible for, is shown below.
Contract Date |
Conditions |
First Home Owner Grant (FHOG) |
New First Home Owner Boost |
First Home Bonus |
First Home Owner |
Total |
From 1 January 2010 to 30 June 2010 |
Established homes only |
$7,000* |
$0.00 |
$2,000‡ |
$0.00 |
$9,000 |
Newly constructed homes in Metropolitan Victoria only |
$7,000* |
$0.00 |
$11,000‡ |
$0.00 |
$18,000 |
|
Newly constructed homes in Regional Victoria only |
$7,000* |
$0.00 |
$11,000‡ |
$4,500‡ |
$22,500 |
|
From 1 October 2009 to 31 December 2009 |
Established homes only |
$7,000 |
$3,500 |
$2,000‡ |
$0.00 |
$12,500 |
Newly constructed homes in Metropolitan Victoria only |
$7,000 |
$7,000 |
$11,000‡ |
$0.00 |
$25,000 |
|
Newly constructed homes in Regional Victoria only |
$7,000 |
$7,000 |
$11,000‡ |
$4,500‡ |
$29,500 |
|
From 1 July 2009 to 30 September 2009 |
Established homes only |
$7,000 |
$7,000 |
$2,000‡ |
$0.00 |
$16,000 |
Newly constructed homes in Metropolitan Victoria only |
$7,000 |
$14,000 |
$11,000‡ |
$0.00 |
$32,000 |
|
Newly constructed homes in Regional Victoria only |
$7,000 |
$14,000 |
$11,000‡ |
$4,500‡ |
$36,500 |
|
From 14 October 2008 to 30 June 2009 |
Established homes only |
$7,000 |
$7,000 |
$3,000# |
$0.00 |
$17,000 |
Newly constructed homes in Metropolitan Victoria only |
$7,000 |
$14,000 |
$5,000# |
$0.00 |
$26,000 |
|
Newly constructed homes in Regional Victoria only |
$7,000 |
$14,000 |
$5,000# |
$3,000# |
$29,000 |
|
From 6 May 2008 to 13 October 2008 |
Established homes only |
$7,000 |
$0.00 |
$3,000# |
$0.00 |
$10,000 |
New homes in Metropolitan Victoria only |
$7,000 |
$0.00 |
$5,000# |
$0.00 |
$12,000 |
|
New homes in Regional Victoria only |
$7,000 |
$0.00 |
$5,000# |
$3,000# |
$15,000 |
|
From 1 January 2007 |
Established homes only |
$7,000 |
$0.00 |
$3,000# |
$0.00 |
$10,000 |
New homes only |
$7,000 |
$0.00 |
$5,000# |
$0.00 |
$12,000 |
|
From 1 January 2006 to 31 December 2006 |
Established and New homes |
$7,000 |
$0.00 |
$3,000# |
$0.00 |
$10,000 |
From 1 May 2004 to 31 December 2005 |
Established and New homes |
$7,000 |
$0.00 |
$5,000# |
$0.00 |
$12,000 |
* Additional Condition for FHOG: To be eligible to receive the FHOG, for contracts entered into between 1 January 2010 and 30 June 2010, the value of the property must not exceed $600,000
Additional Conditions for Bonus and Regional Bonus:
# For contracts entered into up to 30 June 2009, the value of the property must not exceed $500,000.
‡ For contracts entered into between 1 July 2009 to 30 June 2010, the value of the property must not exceed $600,000.
The information provided in the above table is to be used as a guide only.
At Lightning Fast Home Loans, we are happy to provide advice and assistance to maximise the benefit obtainable, so please ring 03 9417 4918 to discuss your circumstances.
This newsletter and some other aricles are also on my web site