Welcome to the first RBA update of the year! We hope that you had a great New Year and have hit the ground running in 2017.
This afternoon the Reserve Bank of Australia (RBA) left official interest rates on hold.
Conditions in the housing market vary considerably around the country. With the property markets in Sydney and Melbourne continuing to grow strongly, it may have been logical to think an interest rate increase was on the cards to cool down the property market, however in other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments are scheduled to come on stream over the next couple of years.
Some economists are predicting that the next move could be down, given the recent inflation results being well below the RBA’s target, and the RBA’s preference to keep the Australian dollar at its current low levels. We will, of course, keep you updated in the coming months.
Irrespective of where rates are headed, we believe it will get tougher and more expensive to obtain investment property loans in the short term. Government regulators will likely force banks to:
- Reduce the loan to value ratios for investment loans (possibly down to 80% of the property’s value)
- Continue to make borrowing standards for investment loans tighter
- Continue to increase Investment rates above home loan rates
These changes are aimed at cooling down the property markets in some areas, allowing first home buyers back into the market.
As you may know, everyone has their own credit file which lists their recent credit enquiries. Recently it was announced that your credit file will also include any outstanding tax debt you have with the Australian Tax Office (if the amount outstanding is greater than $10,000, and you haven’t effectively communicated with the ATO on how you will be repaying the debt.) From our experience most lenders don’t look kindly on clients with tax debt, so it may impact a person’s ability to obtain finance in the future, or at least greatly limit the number of lenders we can approach. I would suggest having a chat to your accountant to get more clarity on the situation.
On a brighter note, you may have noticed properties in your neighbourhood achieving great sales results in the last 12 months. If you are interested to find out how much property is worth, I may be able to provide you with a free property valuation/report. Borrowing against the equity in your home is great way to obtain funds for renovation projects, or to provide funds for other assets (other properties, investments etc.). Please let us know if you are interested.
If we haven’t had a chat in the last couple of years about your current loan products, please send us an email and we’ll get in touch with you. Interest rates and product discounts are always changing, and we want to ensure you aren’t paying too much interest.