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Let's Talk Property - Spring Edition

Experts from all areas of property giving their insight into how the current state of market has impacted their field. Our thoughts in Let's Talk Mortgages - Page 6.

Click the link below to read the full issue:


Let’s Talk Mortgages

Over the last 6 months there has been a huge shift in the mortgage market, with rising interest rates and CCCFA changes, many first home buyers are under the perception it’s now “impossible” to get mortgage approved. However this isn’t the case.

The current market is uncertain, inflation is on the raise and interest rates are continuing to fluctuate trending up, but how much and for how long is unknown. Economists’ vary in opinion, most predicting rates will increase to the 5-7% range and only start stabilising in 1-2years. It’s also important to note, we don’t know if interest rates will return to 2-4%.

August standard interest rates:

Fixed 1 year – 5.00%

Fixed 2 year – 5.40%

Fixed 3 year – 5.70%

Fixed 5 year – 6.25%

*Figures according to average standard interest rates in late August 2022.

Interest rates offered can vary based on your circumstances, Lender and market.

A major factor influencing interest rate changes is the Official Cash Rate (OCR). The OCR is now at 3.0% and is still expected to increase to around 4.0% over the next year. The OCR and interest rates are rising as The Reserve Bank is trying to control inflation which has hit a 30 year high at 7.3%, contributing to the increased cost of living.

While inflation and interest rates are increasing, house prices are on the decline from the peak of late 2021, creating a buyer’s market as there’s less competition and sellers are needing to sell. This is a great opportunity for first home buyers to enter the market, if they can afford it.

The simplest way to know what you can afford is ask yourself this question, “How much can you spend on a mortgage each week?” This is your budget. It’s not about “how much can I qualify for?” as the mortgage repayments of a mortgage that size may be unrealistic for you.

“How much can you spend on a mortgage each week?”

That’s your budget.

How much does a mortgage cost in this market?

$500,000 at 6% $691 per week

$750,000 at 6% $1,037 per week

$1,000,000 at 6% $1,383 per week

*This is based on a P&I loan over a 30 year term; mortgage structure varies.

Reflect on how much your weekly rent is, how much additional funds can you afford per week. For instance, if your rent is $500 and you can put aside another $300 per week, your budget is $800 per week. It’s crucial you’re honest when deciding on your budget, especially as the cost of living is rising.

Buyers who are pre-approved and know their budget have a major advantage at the negotiating table with vendors. This includes developers who need cash flow and have stock they need to sell, asap. Remember there are deals out there.

What should First Home Buyers do? Reach out to your Bank or mortgage advisor early, start the conversation around what you can afford and get your pre-approval submitted. Then, contact your solicitor, real estate agent and go shopping. If the property you love is on budget and you’re ready to buy, why wait? There’s no better time to buy than when you can afford it.

Let's start the conversation.


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