February 2020 Finance Update
We’ve put together four stories below about:
Big property price growth predicted
Understanding how banks value your property
Delay to open banking
Electric/hybrid cars sales skyrocketing
Hopefully we've covered something that will help with your finance and property goals.
Property price growth predicted across Australia
Confidence has returned to the property market in a big way, according to new forecasts from Domain.
Domain has forecast house and unit prices to increase in both 2020 and 2021. These forecasts cover Australia as a whole and also the seven biggest capital cities (with Darwin being excluded).
The bullish forecast shows that the property market has really strengthened since this time last year, when prices were falling in many places, especially Sydney, Melbourne and Perth.
For home owners who had been reluctant to list their property in 2019 – now might be a great time to finally put your home up for sale.
For buyers who had been thinking about entering the market – you might want to move fast so you can get ahead of any future price rises.
Whether you want to buy an owner-occupied or investment property, it’s important you get a mortgage pre-approval before you start making offers, so you know how much you can spend.
Why bank valuations are so important for buyers and owners
Whether you’re buying or refinancing a property, the question of how much it is worth is of critical importance.
People often make the mistake of assuming that a property’s bank valuation will match its market value. This can sometimes lead to a rude shock when a bank valuation comes in lower.
Bank valuations vs market valuations
The market value is an estimate of what the property could fetch on the open market. It can sometimes be higher than a bank valuation, which is used to determine the loan-to-value ratio (LVR) of a specific property when using it as security for a loan. It's important to note that bank valuers are looking at historical data (past sales), whereby an agent/market valuation is based on what might be achieved in the future.
Why bank valuations are so important
Bank valuations impact the amount of money a bank is willing to lend. If a valuation comes in low, the bank may reduce your borrowing capacity. This might make it impossible for you to buy a new home or pull out enough equity from your existing property to fund the purchase of an investment property.
You need expert help
It’s important to note that not all banks will value a property in the same way. As a broker, I can give you inside info on the different ways in which various lenders approach valuations. This may help you get deals across the line and avoid extra costs such as lender’s mortgage insurance (LMI).
Accelerating demand for electric and hybrid cars
The latest findings from Roy Morgan show that the demand for environmentally-friendly vehicles is growing at the expense of petrol-powered engines.
While petrol engines remain the most likely choice of new vehicle type (59.1%) this is down 6.3 percentage points compared to a year ago. The number of people intending to buy either a hybrid or electric vehicle rose 4.7 points and 1.6 points respectively over the same period.
Roy Morgan CEO Michele Levine said that “given the increasing focus on environment issues, we can expect those numbers to keep rising.”
If you’re looking to buy a new vehicle this year (be that petrol, diesel, electric or hybrid) don’t pay more than you need to on car finance. While financing a car through the dealership may be more convenient, it often leads to higher rates and fees. As a broker, I work with several lenders that offer low rates for car purchases.
Delay to open banking rollout
Australia’s competition watchdog, the ACCC, has delayed the rollout of open banking by six months to July 2020.
The delay is to allow for additional implementation work and security testing to be completed.
What is open banking?
Open banking gives consumers access and control of the financial data that banks and other institutions hold on them. Currently, it’s hard for a person to get hold of this information, and for them to ask that it is shared between banks and other accredited companies.
How will open banking benefit consumers?
Once open banking is implemented, it will make it easier for consumers’ actual circumstances to be taken into account when they are engaging with home loan lenders and other providers. This will make quotes more accurate, and improve people’s ability to compare and switch between products and services.
Disclaimer: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. We encourage you to consult a finance professional before acting on any advice provided in this article or on this website.
