Home Loans Newsletter – June 2014

Reserve Bank Interest Rate Announcement – June 2014

Today, the Reserve Bank of Australia met to review the official cash rate. They have decided to leave this rate steady at 2.5% pa. The official rate has remained unchanged for 9 months now.  We expect that most lenders will leave their rates unchanged, in line with the Reserve Bank’s decision.

Historical Australian House Price Growth

Australian house prices have increased over the 12 months to 31 March 2014.  The price increases have been very strong in Sydney (+15.6%) and Melbourne (+11.6%) over this period, and more modest in the other Australian Capital cities (between 0.9% and 4.8%).

Recent demand for residential property has been driven by investors and Self Managed Super Funds (SMSF) which is likely to be one reason for the strong performance of the Sydney and Melbourne markets.  Record 50 year low interest rates and competition amongst lenders for new loans has been another factor affecting recent house price increases.

Data released this week by RP Data indicates that Australian house prices reduced slightly in the month of May 2014.  After the price rises for the year to March 2014 and the recent drop in housing affordability in Australia, we expect that house prices will stabilise at current levels. Housing construction activity has increased in Sydney and Melbourne over the last 12 months and as these projects are completed, more housing will be available. This may result in some slight downward pressure on prices.

Annual change in capital city dwelling values to March 2014

Source: RP Data

Australian house price increases over the last 10 years to 31 March 2014 were more modest – averaging 4.5% pa across all the capital cities.

Interestingly the house price increases for Sydney over the 10 years were a very modest 3.1% pa, so the increase over the last 12 months represents Sydney starting to catch up to the performance of the other Australian capital cities over the last 10 years.

Average annual change in property values – past 10 years to March 2014

Source: RP Data

First Home Saver Account (FHSA) to Cease

The FHSA has, over the past few years, been an effective way to grow savings to put towards a deposit on a first home purchase.

In the Federal Government’s May 2014 budget, it was announced that the FHSA scheme will come to an end. Currently, the Government makes a contribution equal to 17% of any deposits (up to the first $6,000 pa) contributed to a FHSA (i.e. Maximum government contribution is $1,020 pa).

The government will continue to make contributions into existing FHSA until 30 June 2014. From 1 July 2015 existing account holders will be able to withdraw the balance of these accounts with no restrictions on how the money is used.

If you have a FHSA, and have not saved up to the $6,000 limit this financial year, you have until 30 June 2014 to make a deposit and still collect a government contribution of 17%. No new FHSAs can be opened. The tax concessions together with income and asset test exceptions for government benefits associated with those accounts will cease from 1 July 2015. After this date you can access your FHSA funds without restriction.

Harvest Property Loans Interest Rates

At Harvest, we have our own credit licence which means we are able to assist clients with home and investment loans.  We have access to a panel of 30 different lenders which enables us to find the loan that best suits your needs.

We can also assist with the refinancing of an existing loan if your current home or investment loan rate is above current market rates.

The best rates that we currently have available are:

• Variable rate of 4.73%pa
• 1 year fixed rate of 4.34%pa
• 2 year fixed rate of 4.59%pa
• 3 year fixed rate of 4.84%pa