September 2020 Finance Update
Here are four big property and finance stories that are making news right now:
Aussies eyeing up regional move
National credit card debt falls to 14-year low
Most home owners well-placed to pay off their loan
Banks about to start un-pausing mortgages
Read more below.
Aussies eyeing up regional move
COVID-19 has changed the housing preferences of many Australians, according to a new survey of nearly 1,100 property investors.
The PIPA Property Investor Sentiment Survey found coronavirus has made 17% of respondents consider moving to another location.
Of those who are thinking about moving, the most popular reasons were:
Improved lifestyle = 78%
I will be working from home in the future, so I can live anywhere = 46%
Housing affordability = 40%
I don’t want to live in a crowded city any more = 28%
Money is not the most important thing to me any more = 16%
So it’s no surprise more Australians are thinking about buying property in regional markets.
The survey found 22% of respondents believe regional markets are the most appealing place to buy right now – compared to 15% in last year’s survey.
If you’re considering moving to a regional area, I can help you calculate how to fund the move.
National credit card debt falls to 14-year low
Australians have paid off enormous amounts of credit card debt since we entered lockdown, according to new statistics from the Reserve Bank.
Between March and July, the most recent month for which there is data, Australian consumers reduced their credit card debt from $41.3 billion to $34.7 billion – a drop of 16%.
This is the lowest amount since 2006.
Consumers not only paid off old credit card debt between March and July but also cut back of new spending:
Value of transactions = down 6%
Number of transactions = down 17%
At the same time, as the graph shows, the amount of interest being accrued on all credit cards (both personal and business) fell from $28.2 billion to $22.5 billion, a drop of 20%.
It seems Australians have responded to the economic crisis by cutting back on non-essential spending.
If you're thinking of taking out a home loan and you've been eliminating your credit card debt – smart move. Your borrowing power can significantly improve if you have less credit card debt and a lower credit card limit
Most home owners well-placed to pay off their loan
Australia has a very comfortable level of mortgage debt, according to new data from the Australian Bureau of Statistics and Australia’s banking regulator, APRA.
The total value of Australia’s housing was $7.14 trillion at the end of June, while the total value of outstanding loans secured by residential property in Australia was $2.01 trillion.
That means the nation’s collective loan-to-valuation ratio (LVR) was 29.4%.
As you can see in the chart above, the vast majority of outstanding home loans are below 81% LVR. The breakdown is:
Under 60% LVR = 32% of outstanding mortgages
60% LVR to under 80% LVR = 47% of outstanding mortgages
80% LVR to under 90% LVR = 16% of outstanding mortgages
90% LVR to under 95% LVR = 4% of outstanding mortgages
95% LVR and above = 1% of outstanding mortgages
If you apply for a home loan with a deposit of at least 20%, you can save a substantial amount of money:
You won’t have to pay lender’s mortgage insurance (LMI)
You can access lower interest rates and more competitive offers
Lenders are competing hard for low-LVR customers – get in touch to see if we can get a few competing for your business.
Banks are about to start un-pausing mortgages
Borrowers who paused their mortgages for six months when the coronavirus crisis started are facing a moment of truth.
Those deferrals are scheduled to end soon – and, when they do, borrowers may be expected to resume paying off their mortgage.
If you’re still in difficulty, your lender will speak to you about your options.
This may include offering you another four-month extension. Alternatively, your lender might suggest ways to reduce your monthly repayments, such as:
Extending your loan term
Shifting to interest-only payments
“Customers who will be unable to pay their loan over the longer term will be offered tailored assistance that addresses their needs,” according to the Australian Banking Association.
More than 900,000 loans have been deferred since we entered lockdown six months ago, with hundreds of thousands of assessments due in the coming weeks:
80,000 mortgages and 65,000 business loans by the end of September
180,000 mortgages and 40,000 business loans by the end of October
If you’re in need of help running some numbers or taking a look at a new loan, please get in touch
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.
