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Those who haven’t switched home loans are missing out

Those who haven’t switched home loans are missing out

Josh Freedenberg (treasurer) ordered to inquire into the pricing schemes of home loans in Australia. This responsibility was given to the Australian Competition and Consumer Commission (ACCC). Now the ACCC has released its report on this matter. As per that report, the ACCC urges all the homeowners in Australia to review their home loan rates.

The report says that there is a vast difference between the ones who have new home loan schemes compared to those who have slightly older home loans. Those who haven’t refinanced their home loans in a while are paying thousands of dollars of extra interest.

Many people switch lenders instead of loans, and this is not a good thing. Why take the burden to switch lenders when you can easily switch loans and save thousands of dollars?

Take a look at the difference in the interest rates:

As per the latest regulations of ACCC, the average interest rate is 2.62% right now. Taking a look at the data of previous years, you will understand the importance of renewing your home loan:

  • The loans that are less than a year old – 2.91%
  • That is 1-3 years old – 3.09%
  • 3-5 years old – 3.20%
  • 5-10 years old – 3.33%
  • More than 10 years old – 3.66%

The difference mentioned above may not seem significant enough. But if you calculate the impact of this difference over a long period, there is a vast difference.

The latest trend about refinancing home loans

As per the latest report, about $15 billion of home loans have been refinanced in May only. The number of people refinancing home loan schemes is increasing significantly.

Some other reports suggest only 6% of total mortgage holders have refinanced in the last 12 months before June 2020. There are some suggestions from ACCC regarding those who find it difficult to switch their loans. Take a look at this list:

  • The lenders should provide borrowers with the latest information about the best interest rates in the market. This way, they can encourage people to switch to a better option.
  • Reduce the time taken in the discharge process. Most of the borrowers find it hard to switch because the discharge process takes too long.
  • Monitoring should be done regularly to check whether the rate in the market.

All such information will help the existing borrowers get the best home loan interest available in the market.

This is the best time to buy a home as per RBA

In this time of crisis, we have finally got some good news. As per the statements of Philip Lowe (governor of RBA), this is the best time to buy a home, especially for the first home buyers. The market has come to such a situation that seems most favorable for first home buyers.

All of this information came to the public when the discussion was going on in parliament. There, the governor urged all the first home buyers to buy a new home. The number of first homeowners is increasing day by day. So, the demand for first homeowners is very strong.

The interest rates are at a record low, and several other financial aids are also there. Some of the best government programs include First Home Owner Grant and First Home Loan Deposit Scheme. The First Home Owner Grant is a subsidy for the first home buyers.

In that speech, Lowe didn’t address the other concerns well enough. A country like Australia that has such a small population growth can face difficulties because the international borders are not free.

There are going to be several changes in lending policies. The government is trying hard to help the banks get rid of credit.

What about the Australian economy?

To explain the Australian Economy situation, Lowe said that he is very optimistic about the recovery of the Australian economy. He also said that the Australian economy is recovering at a rate that is higher than expected.

The latest financial department data says that the economy is expected to grow by 5% in 2021 while with 4% in 2022.

But there is undoubtedly some bad news about the laborers. The unemployment rate is currently 7% and it will remain above 6% for the upcoming two years.

When someone asked about the vaccine’s status, Lowe said that the vaccine would be available for common people till the last of 2021.

Amidst such chaos, if you plan to have a home loan, you can visit our site for more information about it.

The reason behind fixed home loans being so cheap

As an effect of the COVID-19, the interest rates have fallen too low. But the home loans having a fixed rate are far cheaper as compared to the ones having variable rates. We are going to talk about the reasons behind this issue in detail.

How the government affects fixed-rate loans?

After the COVID-19, the RBA cut variable rates home loans by 0.5% in March 2020. Not all the lenders agreed to it but the government’s overall effects succeeded in getting this rate cut by 0.25%. But the fixed rate interests have fallen by 0.8%. This has happened because the government issued bonds of 3 years to those banks which will significantly cut their rates.

Are the rates falling as a result of it?

Historical data suggests if the fixed-rates fall significantly, the interest rates are about to fall. As unemployment is also at its highest, the rates are supposed to below now. The RBA has said that these rates will remain so until the market comes to a normal state ad fills the buyers with enough confidence.

What about the break fees risks?

The fee that you must pay when you exit your fixed-rate loan is called a break fee. This may happen when you refinance, sell your property, etc. This fee is needed to compensate the lender’s economic loss because you have borrowed the money at a fixed rate.

This time the Australian government has already given the banks cheap rate loans; there is hardly any loss that the banks would suffer if the borrowers break the loan. Even if the borrower repays the loan too early, there is no loss that the bank may suffer.

Should you fix in such a situation?

If you are stuck with this fundamental question of whether you should fix it or not, you may talk to our experts about it. They will give you a clear idea to get the best deal out of it.

The number of first home buyer’s doubles in Australia

New research has revealed that the number of Australian first home buyers has got doubled. The number of such new people was merely 7% in 2019, but it has got up to 16% in 2020.

What are the favorite spots of the first home buyers in Australia?

Work from home has become a norm, but a large portion of these first home buyers is seeking a place near cities. Most of them are searching for homes in the 10-20 km range of the city. This shows that the majority of such people from the new generation want to live a metropolitan life.

People want to live in such locations to maintain the lifestyle that they want. But they should also consider the prices of the property in a suburb area. This is a necessary point to consider as the property rates vary based on the distance in such cases.

What are the ways to help first home buyers reduce their home loan cost?

No matter what you will buy at this time, there is always some support from the government. Take a look at such options from the list given below:

  1. The First Home Super Saver Scheme: This scheme can help you save as much as $30,000 in two years. It is really helpful for couples who are buying homes together. They can use this money to purchase a property within 12 months of withdrawal.
  2. The First Home Loan Deposit Scheme: This scheme enables you to buy a new property by depositing only 5% of the total cost. The government acts as a guarantor for the rest of the money.
  3. The First Home Owner Grants: You can get some money from the Australian government based on where you are buying money, the type of property, and other such factors. This scheme can also get you exemptions from paying stamp duties, etc.

Understanding your financial responsibilities and assistance before buying your first home

The Australian government has announced a Homebuilder grant. This grant will provide the owners-occupiers a grant of $25,000 for building new homes or renovations in their existing homes. But this grant will be available for only those who have signed the contracts between 4 June 2020 to 31 December 2020.

Some important information for the first home buyers:

Those who are buying or building a new home worth $750,000 are eligible for First Home Owner Grant. And if you are buying this home in regional Victoria, you will get $20,000.

Take a look at the exemptions and concessions in this grant:

  1. Young Farmer’s exemption/concession.
  2. First-home owner with family exemption/concession (up to $200,000).
  3. Principal place of residence concession (up to $550,000).
  4. First-home buyer duty exemption/concession (this grant is excluded from the FHOG and can go up to $750,000).
  5. First-home buyer reduction (up to $600,000).
  6. Off-the-plan concession.
  7. Pensioner concession (up to $750,000).

While buying a home in Victoria, you should know that Digital Duties Form is compulsory for all property transfers.

Who is eligible for First Home Owner Grant?

Anyone building a new home can get a $10,000 grant. Your home should not be more than 5 years old and its value should be up to $750,000. You are not eligible for this scheme if you have

  • Owned a home in Australia either separately or jointly.
  • Received an FHOG in Australia.
  • Lived in a home in Australia for more than 6 months and you owned or partly owned that home.

Concessions and exemptions in detail:

In this section of the blog, we are going to talk about the concessions/exemptions in detail. This is very necessary to know about it for your financial benefits.

  1. Young Farmers Exemption/concession:
  • All the farmers who are eligible for this scheme can get it if they are below 35 years and buying new farmland.
  • Farmland having a value up to $600,000 can get an exemption from the duties on the first $300,000.
  • Those farmlands which have a value between $600,000 to $750,000 can get duty concession.
  • You can apply for either the PPR concession of the Young Farmers concession. Choose the one that suits your demands perfectly.
  1. First-home owner with a family exemption:
  • This exemption is for those who have bought their home on or after January 1, 2006, are eligible for this scheme. A complete exemption is available if your property is worth $150,000 and a concession is available if the value of your property is up to $200,000.
  1. For the pensioners:
  • If you are a pensioner, you have to be sure that you can apply for only among the duty exemption, concession, or pensioner exemption. Be careful before you choose one.
  1. The Principal Place of Residence (PPR) concession:
  • This concession is only for those who are living in their homes and they intend to live there for the upcoming 12 months (excluding holidays and other investments).
  1. Off-the-plan concessions:
  • If you are buying an off-the-plan property as your first home, you can get this grant but you must live in that property as your home. The contract must be signed on or before 1 July 2017. This concession reduces the amount from the contract price of your home, the price involved in refurbishment occurring after signing the contract.
  1. First-home buyer reduction:
  • You can get a duty exemption of up to 50% if you have entered a contract on or before 1 July 2017 and the property is worth $600,000. Though it depends on the date when you signed your contract on or after 1 September 2014, you can get up to a 50% concession.

Conclusion:

We have given you all the information about getting the grants and concessions if you are a first home buyer.

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