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.
Long overdue easing of responsible lending
It was not that long ago in our last EDM, we discussed the idea that the lending policy had gone too far after ASIC lost its responsible lending case against Westpac, as the RBA and Treasury both issued warnings against the strict policies causing potential economic impact.
Less than a week later, Treasurer Josh Frydenberg announced he would overhaul the laws governing mortgages, personal loans, credit cards, and payday lending to streamline decisions on whether customers can afford the loans they seek.
This is promising news for the recovery of the COVID 19 economic recession, as a flow of loans will be encouraged due to less onerous credit rules accompanied by easing interest rates.
Ultimately, customers will face faster access to loans under simpler rules, taking away the confusion over lending obligations for banks and finance companies.
We expect the easing of responsible lending laws to:
- Reduce the administrational burden of credit applications
- Apply a more logical and forward-looking assessment process
- Make the assessment process faster and more efficient
- Speed up the flow of credit
Unpacking the Federal Budget
Following the record-breaking budget announcement on October 6th, the government has made it clear they want to support the housing market at all costs with the removal of responsible lending guidelines in addition to a suspected RBA cut from 0.25% to 0.10% at the November meeting.
It will soon be easier for Australians to take out mortgages and refinance their home loans. According to the ABS, the total value of home loan approvals has already surged 12.6% in August to $21.2 billion as interest rates continue to drop.
- To support new investment and increase business cash flow, businesses will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed
- To help build a pipeline of skilled workers, the apprentice wage subsidy will be increased to 50%
- To support job creation, employers will be able to claim $200/week for each additional eligible employee they hire aged 16 to 29 years old; and $100 a week for each additional eligible employee aged 30 to 35 years old
FIRST HOME BUYERS
- A further 10,000 FHLDS spots have been released for NEW BUILDS only, meaning off the plan properties and house & landing packages
- Max purchase price for the scheme has been increased from $700k up to $950k
- Additional schemes may be released for established builds later in the year, or early next year
- As expected, the RBA cash rate remained unchanged at 0.25% for October
- RBA has increased the Term Funding Facility which gives banks funding for 3-year terms at 0.25%. This is supporting the supply of credit and low interest rates for households and businesses
- Its now widely predicted the cash rate will be cut from 0.25% to 0.10% at the November meeting
- As of last week, the RBA confirmed via the Governors speech that the cash rate is not expected to increase for at least 3 years
Rates remaining low is a key factor in supporting consumer confidence and decision making, as well as housing market activity – especially surging first home buyer activity.