Finance Update

There’s always lots happening in the finance world with interest rates and new legislation forever changing. What a year its been with interest rates continuing to rise, I’m sure you will agree those few months on pause gave us all a little breather!

Our friends at the Finance Co. Group have given us their latest finance wrap and we thought we’d share all that’s been happening in the finance world.

Australian’s refinance more than $20bn of loans

With lots of people coming off fixed rates right now, it’s no surprise that an enormous amount of refinancing is occurring, as borrowers look to switch to lower-rate loans.

The latest Australian Bureau of Statistics (ABS) data has revealed that borrowers did $20.60 billion of refinancing in August – which was 3.9% lower than the month before but 12.4% higher than the year before. Meanwhile, the ABS also revealed that the value of all new home loan commitments in August was $24.82 billion, which was 2.2% higher than the month before.

Owner-occupier borrowing rose 2.6% to $16.07 billion, while investor borrowing rose 1.6% to $8.75 billion.

That said, home loan activity has fallen on a year-on-year basis:

  • Total borrowing down 9.4%
  • Owner-occupier down 12.5%
  • Investor down 3.0%

How have interest rates evolved over the past 12 months

The latest Reserve Bank of Australia (RBA) data has shown the impact the RBA’s cash rate rises have had on the mortgage market.

The key is to compare average interest rates for all outstanding loans in April 2022 – the month before the first rate rise – and August 2023 – the most recent month for which we have data.

During that time, the RBA increased the cash rate by 4.00 percentage points. Interest rates for outstanding loans have, on average, increased by less than that amount, in part because some loans were fixed at lower rates.

For owner-occupied loans, rates have increased by an average of:

  • 2.82 percentage points for principal-and-interest loans
  • 3.31 percentage points for interest-only loans

For investment loans, rates have increased by:

  • 2.83 percentage points for principal-and-interest loans
  • 2.73 percentage points for interest-only loans

How the federal government is helping first home buyers

A new report, from Housing Australia, has revealed that about one in three of all first home buyers in the 2022-23 financial year used the federal government’s Housing Guarantee Scheme (HGS) and its three different assistance programs.

Here’s what the typical participant looked like, according to Housing Australia:

  1. First Home Guarantee: the median participant was in the 30-34 age bracket, had a household income of $76,000 and bought a property worth $459,000.

  2. Regional First Home Buyer Guarantee: participants were aged 25-29, earned $71,000 and bought a $389,000 home.

  3. Family Home Guarantee (for single parents): participants were aged 35-39, earned $70,000 and bought a $422,000 home.

Housing Australia has not only taken control of the HGS, but also the National Housing Infrastructure Facility, which provides loans and grants for critical infrastructure to unlock and accelerate new housing supply.

As always, if you need any help regarding your home loan or finance needs please reach out to the team at The Finance Co. Group on 8004 5020.

Image – Gymea Bay Baths