Finance Update March 2024

Happy autumn! Hope you’re enjoying the falling leaves and the return of the football codes. Here’s what’s making news in finance and property:

  • Investor activity rises
  • Stamp duty costs rising
  • Conditions improving for FHBs
  • New home purchases up 5.3%

The latest tranche of home loans data from the banking regulator, APRA, has revealed three interesting shifts in the mortgage market over the past year.

First, there’s been a meaningful rise in investor activity during that time. During the December 2022 quarter, 30.2% of new loans were for investment purposes; but in the December 2023 quarter, the share increased to 32.4%. There’s been a corresponding decline in owner-occupier activity, which fell from 67.7% to 65.6%.Second, there’s been a sharp decline in borrowing with a debt-to-income of 6 or greater (e.g. someone on a $100,000 salary borrowing $600,000 or more). This fell from a 11.0% share of new loans in December 2022 to only 5.6% in December 2023.

Finally, the share of borrowing with a loan-to-value ratio of 80% or higher has actually increased, from 30.6% of new loans in December 2022 to 31.4% in December 2023.

Whether you’re an owner-occupier or investor, I can advise you about your borrowing power and help you get a great home loan.

New research by the e61 Institute and PropTrack has revealed there’s been a significant increase in relative stamp duty costs in recent decades.

Back in the early 1980s, buyers in Sydney, Melbourne, Brisbane and Adelaide needed to do about one month’s work to cover the cost of stamp duty, assuming they purchased a median-priced property and earned the average post-tax income. But as of 2023, it takes about six months’ work in Sydney and Melbourne, five in Adelaide and four in Brisbane.

Last year, almost all buyers faced a stamp duty rate equivalent to at least 3% of the sale price, while, in the early 1990s, almost all buyers paid less than this amount.

PropTrack senior economist Angus Moore said the two reasons stamp duty had become relatively more expensive were because property prices had grown faster than incomes and state governments had allowed ‘bracket creep’ to occur with stamp duty tax brackets.

“Bracket creep happens, firstly, because the price brackets have been updated only infrequently and, secondly, because home prices have grown, often substantially, since the brackets were last set,” he said.

“That means more properties have moved up the brackets and are now paying higher rates of stamp duty.”

First home buyers are able to enter the market a little faster than a year ago, new research has found.

At a national level in February, it took 4 years 9 months for a first home buyer to save a 20% deposit on an entry-level house, compared to 4 years 11 months the year before. For an entry-level unit, the time to save a deposit was 3 years 5 months – one month faster than the year before.

Domain classified an entry-level property as one ranked at the 25th price percentile (with the 1st percentile being the cheapest home and the 100th being the dearest). Domain’s calculations assumed that first home buyers were a couple aged between 25-34, earning an average salary for someone their age.

The reason that first home buyers are now able to save a deposit more quickly is not because property prices have fallen over the past year – because they’ve actually increased. Rather, it’s because earnings power (through a combination of higher wages and higher savings account interest rates) has grown faster than property prices.

Finance Update February 2024

The stories that caught my eye this month cover home loans, lender’s mortgage insurance and the property market:

  • When should you buy?
  • FHB loans rise 12.9%
  • 50% of borrowers unsure about LMI
  • Rental growth continues

Many economists believe the Reserve Bank will start cutting interest rates in the final quarter of 2024. So if you’re thinking about entering the market, should you buy now or wait for those potential rate cuts to occur?

To answer that question, it can be helpful to consult long-term data. During the decade to January 2024, Australia’s median property rose 80.1%, according to PropTrack. Prices rose faster in the combined regions than the combined capital cities (92.5% vs 75.7%), while house growth exceeded unit growth (89.4% v 44.4%). But the general trend for all these categories was the same – up.

Domain’s chief of research & economics, Nicola Powell, believes buyers should take a longer-term view and not get too hung up about how the market is currently performing.

“When you’re purchasing a property, it’s for a long-term investment and you are going to ride multiple property cycles, and that’s how you build financial wealth. So if I would give any advice, it would be to buy when it’s right for you. Housing markets are complex and often impossible to predict.”

Ultimately, the question or whether to buy now depends on your personal situation and goals. For some, now will be the right time; for others, it will be better to wait. I’m happy to have a chat and crunch some numbers for you, so I can present personalised loan options for your situation.

There’s been a significant increase in first home buyer activity over the past year, based on the latest data from the Australian Bureau of Statistics.

There were a total of 9,491 owner-occupier first home buyer mortgages issued across Australia in December 2023, which was 12.9% higher than the year before.

First home buyer activity rose in six of the eight states and territories, with Queensland and Tasmania being the exceptions to the rule.

While it can be challenging to buy your first home, this data shows it’s not impossible. Here are four tips to get on the property ladder:

  1. Look for ways to decrease your spending
  2. Check whether you’re eligible for the First Home Guarantee or Regional First Home Buyer Guarantee
  3. Consider asking your parents or another relative to guarantee your home loan (so you can drastically reduce or even eliminate your deposit requirement)
  4. Contact me, so I can explain your options and coach you through the process

A significant number of borrowers are unclear about lender’s mortgage insurance (LMI), according to a recent survey of mortgage brokers by LMI provider Helia.

The survey found that 85% of broker respondents think LMI can benefit buyers who want to get into the market earlier, while 70% believe it can also help renters who want to transition into ownership. However, 50% of respondents feel borrowers generally don’t properly understand LMI.

LMI is a form of insurance that protects the lender in case the borrower defaults on the mortgage and the lender can’t recover the loan from selling the home. The premium varies, depending on the size, type and location of the property.

Lenders generally insist borrowers take out LMI if they want to buy a property with less than a 20% deposit – although, for some professions, such as doctors and lawyers, it’s possible to buy a property with a smaller deposit without paying LMI.

The upside to using LMI is you can enter the market with a smaller deposit; the downside is the cost.

I’d be happy to discuss both the potential benefits and costs, so you can make an informed decision about whether LMI is right for your personal situation.

Rents have increased in most capital cities over the past year and are likely to continue rising throughout 2024, according to a leading property data expert.

Between the December quarters of 2022 and 2023, the median rent on realestate.com.au rose 11.5%. That included double-digit gains in Perth (20.0%), Melbourne (18.3%), Sydney (16.7%) and Adelaide (12.5%), as well as increases in Brisbane (9.1%) and Darwin (1.7%). By contrast, rents stagnated in Canberra (0.0%) and declined in Hobart (-4.8%).

During the same period, the vacancy rate fell from 1.3% to just 1.1%. With rents growing and vacancies falling, this is potentially a good time to be a property investor.PropTrack’s director of economic research, Cameron Kusher, forecast that the “tough rental market conditions” would continue.

“We expect supply to remain tight and demand to stay strong, likely pushing rents higher,” he said.

“Lending to investors trended higher over 2023, indicating that investors are returning to the housing market. However, many investors continued to sell, resulting in a relatively small pool of rental properties being available for the large number of people seeking accommodation. The rapid increase in Australia’s population exacerbated rental market challenges, as most people migrating to Australia become renters.”

Unlocking Home Loans for Self-Employed Dreamers on the Mornington Peninsula

Dreaming of owning a piece of paradise on the picturesque Mornington Peninsula? For self-employed individuals, the journey towards securing a new home loan might appear intricate, but fear not – Bayland Finance is here to guide you through the process and make your dream a reality. With a deep understanding of the unique financial landscape faced by self-employed borrowers, we offer tailored solutions that go beyond traditional lending norms.

Navigating Income Documentation Challenges:

For the self-employed, proving income can be a bit more complex compared to salaried individuals. Many lenders typically require two years’ worth of tax returns to establish your income stability. However, the world of entrepreneurship is dynamic, and waiting for your most recent tax return to be lodged might not be an option when the perfect property comes along.

We understand that your business success might not always align with tax return schedules. This is why we offer a range of solutions that allow us to proceed without waiting for your latest tax return. Our aim is to ensure that you don’t miss out on the opportunity to purchase your dream home just because of timing constraints.

Diverse Income Documents Accepted:

When it comes to self-employed borrowers, traditional income documents like tax returns are just one piece of the puzzle. We recognize that your financial situation might be best represented by other documents. These could include your most recent set of financial statements, management accounts, Business Activity Statements (BAS), bank statements, and even payslips in some cases.

Bayland Finance has years of experience working with self-employed individuals and understands the intricacies of their financial situation. Our team is well-versed in evaluating various forms of income documentation to present a comprehensive and accurate picture of your financial capabilities.

Our Expertise, Your Advantage:

At Bayland Finance, we pride ourselves on our deep experience with self-employed borrowers. Our commitment to understanding the unique challenges faced by entrepreneurs sets us apart. We recognise that your income might not fit the traditional mould, and we have the knowledge and expertise to find lenders who appreciate the diversity and dynamism of your financial situation.

What’s more, our services aren’t limited to home loans alone. Whether you’re a self-employed individual looking to secure a mortgage for your dream property, or a business owner exploring commercial property options, we’ve got you covered. Our team is equipped to handle both residential and commercial inquiries, making us a one-stop solution for all your property-related financial needs.

A Comprehensive Team, Ready for You:

Navigating the home loan landscape can be daunting, especially when you’re self-employed. This is why Bayland Finance offers you more than just a lending hand. Our team includes conveyancers, lending specialists, accountants, and financial advisors who work in synergy to provide you with a comprehensive and holistic approach.

From the moment you step into our office, you’ll be met with professionals who understand your unique needs. Our lending specialists know the financial market inside out and will match you with the right loan that suits your self-employed status. Our accountants and financial advisors ensure that your loan aligns with your broader financial goals. And our conveyancers walk you through the legal intricacies of property transactions, making the process smooth and hassle-free.

Conclusion: Your Dreams, Our Expertise

As a self-employed individual, your financial journey is distinct and deserves tailored attention. The Mornington Peninsula offers a serene backdrop for your dream home, and with Bayland Finance by your side, that dream is well within reach.

Whether it’s finding lenders who appreciate diverse income sources, utilising a variety of income documents, or simply benefiting from our comprehensive team’s expertise, we’re here to make your home loan journey seamless. Our experience, dedication, and commitment to your success set us apart as your go-to partner on the path to homeownership. Don’t let your entrepreneurial spirit hold you back – contact Bayland Finance today and embark on a home loan journey designed just for you.

7 Reasons to use a Mortgage Broker

Your Financial Compass, Without the Price Tag: We’re a Free Service

Are you considering taking the big step towards homeownership? Or perhaps you’re contemplating a strategic investment in the property market?

Either way, navigating the labyrinth of home loans, interest rates, and financial jargon can be a daunting task. This is where mortgage brokers come in – your trusted allies in the world of property finance. With over 70% of loans now being submitted through mortgage brokers, it’s clear that they’re not just a trend, but a strategic advantage. Let’s delve into why using a mortgage broker can be your key to unlocking a seamless and customised home financing journey.

At Bayland Finance, we believe that everyone deserves a secure financial future.
Our team of lending specialists are dedicated to helping you every step of the way – from first home buyers to those looking to buy their dream home, or build their investment property portfolio.

With our personalised approach and commitment to customer service, we can help you navigate the complex world of lending and find the best solutions to achieve your future goals.

1. We Educate and Advise

Imagine having a personal guide through the intricate maze of home loan options, policies, and lenders. Mortgage brokers are exactly that – experts in the field who specialise in connecting you with the most suitable loan options. They have an in-depth understanding of the lending landscape and stay updated on the latest market trends. This wealth of knowledge is invaluable in helping you make informed decisions that align with your financial goals.

2. Tailored Solutions, Personalised Service

No two individuals have the same financial situation or aspirations. A mortgage broker recognises this and tailors solutions to match your unique needs. They take the time to understand your financial position, future plans, and preferences, and then match you with loans that fit like a glove. This personalised service ensures that you’re not just settling for a loan, but embracing a financial solution that complements your lifestyle.

3. Unbiased Advice

Mortgage brokers are not affiliated with any specific lender, which means their advice is unbiased and driven solely by your best interests. They act as intermediaries between you and the lenders, negotiating terms and rates on your behalf. This transparency ensures that you’re presented with a range of options and can make an educated choice that aligns with your financial wellbeing.

4. Saves You Time and Effort

The search for the perfect home loan can be time-consuming and overwhelming. Mortgage brokers simplify the process by doing the legwork for you. They compare loan options, negotiate rates, and manage paperwork, saving you precious time and sparing you from the stress of dealing with banks and lenders directly.

5. Maximising Your Borrowing Capacity

One of the crucial aspects of securing a home loan is understanding your borrowing capacity. Mortgage brokers have the expertise to evaluate your financial situation and help you determine how much you can borrow. This enables you to explore homes that might have seemed out of reach, ultimately bringing you closer to the house of your dreams.

6. Access to a Wide Network

Mortgage brokers have access to a broad network of lenders, including those that may not be easily accessible to the general public. This means you can explore a diverse range of loan products, interest rates, and terms, increasing your chances of finding a loan that aligns with your financial goals.

7. Smooth and Efficient Process

From the initial consultation to the final settlement, mortgage brokers streamline the loan application process. They are well-versed in the documentation requirements and can guide you through each step, ensuring that nothing is missed. This efficient handling minimises the chances of delays and roadblocks along the way.

Why Choose Bayland Finance as your Mortgage Broker?

When it comes to selecting a mortgage broker, experience and reputation matter. Bayland Finance boasts over 16 years of expertise in the mortgage broking arena, positioning them as industry leaders.

Their commitment to exceptional customer service and tailored solutions has earned them recognition as the MFAA mortgage broker of the year winner for the regional VIC/TAS area. This accolade is a testament to their dedication to helping clients achieve their property finance goals with a personal touch.

Navigating the complex world of home financing can be made simpler, smoother, and more rewarding with the assistance of a mortgage broker. These experts offer not just financial advice, but a partnership that is committed to your financial success. With a vast network of lenders, personalised service, and an unwavering dedication to your needs, mortgage brokers like Bayland Finance are the bridge between you and your dream home. So, why not embrace their expertise and embark on your home financing journey with confidence? Your financial future deserves nothing less.