February 2021 Finance Update
There's some big property and tax news around right now:
Positive conditions for borrowers
ATO issues tax scam warning
Property investors smiling
Mortgage deferrals keep falling
Read more below.
Interest payments reach 25-year low
Record-low interest rates are helping drive strong buyer interest and surging prices in many property markets throughout Australia.
The share of income that households are devoting to mortgage repayments has fallen to its lowest level since the mid-1980s, according to AMP Capital chief economist Shane Oliver.
“There is no denying housing affordability is poor, debt is high and some households are suffering significant mortgage stress. But most borrowers appear to be able to service their mortgages,” Dr Oliver said.
“In the absence of an unexpected renewed economic downturn, it’s hard to see much rise in distressed sales. It’s also easy to see from this chart, when combined with home buyer incentives, why home borrowing and buying is surging again.”
Home loan applications reached record levels in January, according to the most recent data from the Australian Bureau of Statistics.
In other words, buyers are out in force. So if you’re planning to buy in 2021, don’t delay, because waiting could potentially cost you tens of thousands of dollars.
ATO warns Australians about fake calls demanding money
Beware: there has been a spike in automated scam calls impersonating the Australian Taxation Office.
Scammers are calling people to claim the ATO has suspended their tax file number due to suspected fraudulent activity.
Targets are then asked to transfer their money to ‘the ATO’ (i.e. the scammers) so the tax office can protect their money while the matter is resolved.
The ATO said that while it does call taxpayers, it would never:
send unsolicited pre-recorded phone messages
use aggressive behaviour or threaten you with arrest
suspend your TFN
request direct transfers of money to a personal bank account
project the ATO’s number onto your caller ID
The ATO said that if you receive a call, email or SMS and aren’t sure who’s contacting you, “it’s OK to hang up or not respond”.
Instead, phone the ATO’s dedicated scam line 1800 008 540 to check if the contact was legitimate.
Balance of power tips further in landlords’ favour
It’s a great time to be a property investor, with vacancy rates falling throughout Australia.
Vacancy rates fell in six capital cities between December and January, and held steady in the other two, according to new data from SQM Research.
Sydney and Melbourne are currently tenants’ markets, even though vacancy rates are falling. However, the balance of power favours landlords in the other capitals.
If you’re a property investor and there’s a limited supply of rental accommodation:
it’s easier for you to find tenants
it’s easier for you to raise rents
Another reason it’s such a great time to be a property investor is that with interest rates at record-low levels, there’s a good chance your property’s income (rent) will exceed the expenses (mortgage payments, property management fees, maintenance and insurance).
Mortgage deferrals keep falling
The vast majority of borrowers are now paying their mortgages, with only 2.4% of home loans on pause at the end of December, according to new data.
Banks allowed Australians to pause their mortgages repayments in March 2020, at the start of the Covid crisis. The share of deferrals peaked in May and has been falling since:
April = 9%
May = 11%
June = 10%
July = 9%
August = 9%
September = 7%
October = 4%
November = 3%
Contact me if you’re struggling with your mortgage. Most lenders have hardship programs, and the sooner we speak to them about your issue, the more favourable the result is likely to be.
Thanks for reading. Get in touch if you need property or finance advice.
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.
