For those borrowers who have some deposit saved but are falling short of the 20% mark, a Guarantor Loan eliminates the need to pay lenders mortgage insurance, which can potentially save them tens of thousands of dollars.
The headline act of the 2017 budget, announced last night, was a new bank levy that aims to raise $6.2 billion over the next 4 years, with many already calling this a coordinated strike against the Big 4 and Macquarie. The implicit costs of this levy will no doubt be passed onto borrowers via more “out of cycle” interest rate hikes, similar to earlier this year. The term “out of cycle” simply means the banks are increasing their interest rates charged to borrowers irrespective of what the RBA and the cash rate is doing, blaming the hikes on increases to the cost of funding.
The good news arising from this levy is that it is only being charged to 5 of our largest banks with deposits over $100 billion, meaning that we are likely to see further rebalancing of the market. When the Big 4 and Macquarie eventually do ship the buck onto consumers, smaller banks will become relatively more competitive, and we will likely see a shift in market share towards the tier 2 and 3 banks.
The budget also highlighted the growing concern that is housing affordability. First home buyers can now make voluntary contributions to their super of $15,000 per annum, and up to a maximum of $30,000, to help towards a deposit on their first home/apartment. The real advantage here is that these extra contributions (i.e. on top of the compulsory 9.5%) are only taxed at 15% rather than the ordinary marginal tax rate (closer to 30%). The government believes this will mean a first home buyer will save 30% more than if they were to use an ordinary savings account.
Retirees who plan to downsize their family home have also been given a tax benefit, as they will now be allowed to transfer up to $300,000 (per person) into their super from the sale of their home. This will encourage retires to downsize and free up stock for younger families hoping to enter the property market.
Further curbs on foreign investors purchasing real estate have also been introduced. For instance, a new $5000 levy will be charged to foreign property investors for leaving a property vacant for more than 6 months, and property developers now aren’t allowed to sell more than 50% of new dwellings to foreign investors.
In summary, the mortgage market is likely to see further turbulence over the next 6-12 months as banks continue to adjust to further regulatory pressures and now government imposed levies. This is an ideal time for borrowers to re-assess their financial position to make sure that there bank still has their best interests at heart and not just their bottom line.
Feel free to get in contact with an Azura Financial representative to make sure you are getting the best possible advice.
0450 212 049