Home Loan Market Update – November 2019

We are well and truly in the middle of the spring selling season, property prices appear to be on an upward trajectory once again. In part, thanks to the consecutive cash rate cuts by the Reserve Bank of Australia (RBA) in June and July, followed by a third rate cut in October.

Buyer sentiment has also been lifted by recent changes to the way lenders assess borrowing capacity, with the Australian Prudential Regulation Authority (APRA) removing the 7% minimum assessment rate used to assess a borrower’s ability to repay their loan. Lenders are now free to determine their own minimum assessment thresholds. Most lenders are using assessment rates between 5.35% and 5.75%.

The RBA decided to reduce the cash rate in early October in order to further reduce the unemployment rate and stimulate the Australian economy – which has been expanding at a slower than expected rate. GDP growth was a paltry 1.4% in the June quarter – the lowest we’ve seen in a decade.

Despite these drastic rate cuts, the market is anticipating another rate cut in early 2020. That said, the RBA board is well aware of the unintended consequence of further lowering the cash rate, with property market activities especially in Sydney and Melbourne at the front of their minds.

In these capital cities, given the all-time record low interest rate environment, auction clearance rates have surged to an average of around 75% in Sydney for the month of October. A marked increase on the same time last year.

Interest Rate Changes Update – November 2019

The RBA has reduced the official interest rates by 0.75%, with a 0.25% reduction at the beginning of June, July and October. Lenders have not passed on the full rate cuts, most notably the last one in October.

This has prompted the Federal Government to announce another enquiry to find the reasons behind the Banks’ failure to pass on the RBA’s rate cuts. If there are further rate cuts from the RBA, the Federal Government will expect Lenders to pass them on in full.

With that said, such low official rates place massive pressure on the Banks as their operating margins are squeezed. Will this lead to a relaxation of Lenders’ currently tight lending criteria? Only time will tell.

Lenders Rates Reduction Following RBA October Rate Cut

ANZ: Reducing all P&I variable rates by 0.14%, and some IO variable rates by up to 0.25% effective 11 October 2019.

CBA: Reducing all Owner Occupied, and Investment P&I variable rates by 0.13%, and Investment IO variable rate by 0.25% effective 22 October 2019.

NAB: Reducing all Owner Occupied, and Investment P&I variable rates by 0.15%, and Investment IO variable rate by 0.30% effective 11 October 2019.

Westpac/St George: Reducing all variable Owner Occupied and variable Investment rates by 0.15%, effective 16 October 2019.

ING: Reducing all variable Owner Occupied and variable Investment rates by 0.15%, effective 16 October 2019.

Macquarie Bank: Reducing all Standard Variable rates by 0.15% effective 8 October 2019 for new loans and 17 October for existing loans.

AMP Bank: Decreasing the interest rates on all variable rate home loans and line of credits by 0.15% effective 14 October 2019

BankWest: Reducing all Owner Occupied, and Investment P&I variable rates by 0.13%, and Investment IO variable rate by 0.25% effective 16 October 2019.

Citibank: Reducing all variable rates by 0.15% effective 21 October 2019.

Current Specials

There are a number of special offers currently in the market include:

Owner Occupied Fixed Rate Loans

St George: Offering 1, 2 or 3 Year Fixed at 2.84% (comparison rate from 3.78% p.a.) for loans up to 60% LVR, or 2.89% (comparison rate from 3.83% p.a.) for up to 80% LVR. Min $150K loan, P&I repayment, under Advantage Package only ($395 annual fee applies).

ING: Offering 2.89% (comparison rate 4.11% p.a.) for 2 Year Fixed when combined with Orange Advantage variable loan, P&I repayment only, up to 95% LVR including LMI, $299 annual fee, $299 legal/settlement fee.

Investment Fixed Rate Loans

Macquarie Bank: Offering 1, 2 or 3 Year Fixed at 3.19% p.a. (from 3.34% p.a. comparison rate), P&I repayment only, max. 70% LVR, $363 legal/settlement fee, no annual fee

Owner Occupied Variable Rate Loans

Firstmac: offering 2.99% (comparison rate 3.02% p.a.), P&I repayment only, max. 80% LVR, $720 application/legal fee, no offset but no annual fee

ING: Mortgage Simplifier offering 3.03% (3.06% comparison rate), min. loan $150K, P&I repayment only, max. 80% LVR, $299 legal/settlement fee, no offset but no annual fee

Investment Variable Rate Loans

Firstmac: offering 3.19% (comparison rate 3.22% p.a.), P&I repayment only, max. 80% LVR, $720 application/legal fee, no offset but no annual fee

Rebates

A number of lenders are still offering purchase or refinance rebates.

NAB: offering $2000 Home Buying Bonus or $2000 Refinance Bonus for new loans (min. $250,000). An eligible NAB transaction account is required, and the loan must settle by 31 December 2019.

CBA: offering $2000 refinance rebate for loans of $250,000 or more. Applications must be submitted before 10 January 2020. Only available for Owner Occupied loans with P&I repayment, or all Investment loans only.

Please contact us to find out more!