Home loan news
First off we’ve got some more fixed rate reductions, so this time around Westpac has come in, and now our two and three year rates are below 2%. They are from 1.89% that is for two years and three years is now 1.98%. So that is pretty big news in terms of the market. I think they are the second biggest bank in Australia, so you can bet your bottom dollar that everyone else is going to follow. This trend of reducing interest rates is going to keep happening, especially with the Reserve Bank pinning interest rates down to I think they mentioned 2028. So that is a long time with super low rates, which gives you some idea what’s going to happen to house prices.
Major bank steps back on tough lending policy. So this one is CBA Commonwealth Bank, which is Australia’s biggest lender. CBA announced a few changes, but the major change is the reduction in statements from their credit assessment process. So one of the biggest pain points in the last three years is banks, when they assess your home loan, they want to look at your bank statements and figure out what your living expenses are. Everyone’s living expenses can vary a lot from month to month. Banks peel over every transaction, it has just been made a nightmare.
So this, I think is the start of a major peel back with the whole industry. To further support my opinion there,we have got Responsible Lending laws, one back which is due to go through Parliament. As you can see in this Sydney Morning Herald article banks and broker Responsible Lending roll back as a win for customers.
This is all got to do with Responsible Lending laws, but they’ve kind of worked at all into lending around the pandemic because that has not really worked very well. So as banks do, they are going to push for more lenient lending across the board. I quietly think they will get in, my opinion is that banks and the government, they are all good mates, all of them.
Now in property market news,
In terms of looking at the property market and seeing how it is behaving, or how it is performing, I look at a couple of other things. Basically, it’s demand versus supply. Demand is quite high at the moment, obviously. If you’re paying attention to how properties are going….. you know, they are being listed one day and getting sold the next. So demand is high, I do not expect the demand to be so high over the coming months. However, the demand is really high, because basically we were locked down and no one bought houses for six months. Having said that, I do not think the nightmare scenario is going to happen where you know, the bottom end is going to fall out of the housing market. Having maintained since the pandemic started and I don’t see that changing.
On the flip side to it, you look at the supply and there is no supply on the market. So the low supply is going to make the demand still look relatively high and continue to push prices higher. The only thing that would slow that down I think is if the global market crashed which is definitely something that could happen. But overall, I still think it’s going to go up.
The interesting thing about the market is it is not just first home buyers, we are seeing on the news first timer buyers, because there is 101 grants out these days, but in the Mornington Peninsula area, and the Frankston bayside area where I operate, there is quite a number of upsizers as well. So they bought their first home five or 10 years ago, now they have got better jobs, they have a better income, they have some equity and now they are going for that house, you know, five K’s away, just in a better suburb and a better surroundings. They can afford what that initially wanted but could not afford as a first home buyer.
So it is actually affecting the million dollar plus part of the market as well. So those properties are flying off, and there’s low supply of that. The third one is a little article, from the Herald Sun article from June, which is funnily enough, just after the first lockdown and just before the second lockdown. It says that property prices dropping, despite what a lot of the alarmist warnings, and surprise, surprise, it’s got the Mornington Peninsula is one of those areas to watch out for. I think coming off the back of COVID, the same thing is going to happen with people that live in the inner city, that don’t want to live in the city anymore. The city is a great place to sell their place, which might be worth a fair bit now and go and buy in the peninsula.
Broader economy news
Broader economy news is the same as what it’s been for a while, actually, it is weak. There are no wage increases for probably seven or eight years now, no real wage increases and obviously COVID is having its effects. So I just wanted to show you this article, which basically shows you what I’ve mentioned before with the Reserve Bank of Australia pinning down interest rates.
So basically, what they are saying is they are not going to increase home loan interest rates until they see wage rises, which we haven’t seen. So I would make a fair assumption that that is not coming anytime soon. That tells me that interest rates are going to remain low and that would tell me property markets are going to continue to rise.
Next is money printer BRRRRR and that is that is basically coming off that article which is below. So central banks, not just in Australia but across the world are going to continue to print money. That printed money is going to push up asset prices, so property, which most of my clients will want to hear about, is probably just going to continue to go up for now, because they’re just going to keep printing money.
So off the back of that I just wanted to show you this article, which I found from 2015 and the headline says that all money printing has caused inflation, just not where we expected it to. What that means is that the money that is printed was meant to cause wage inflation but what actually happened was asset inflation. Now we are in a position where we have got record property prices, record stocks prices, record bonds prices, record gold prices, even record crypto prices, which wasn’t even a thing until recently. So this has been the reason why I outlined this, it has been this way for the last five years, nothing is going to change, things are going to continue to grow in value and if you have any more questions please don’t hesitate to reach out and ask a question to me.
