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property lending

Tighter lending restrictions on the way

Tighter lending restrictions will be introduced within two months, as announced recently by Federal Treasurer Josh Fyrdenberg. Australia’s financial regulators are expected to restrict the size of new loans, with expectations that borrowing capacity could soon be capped at below six times the borrower’s income.

The changes raise concerns after many borrowers have taken out loans larger than six times the size of their income as property purchasers attempt to keep up with sky-rocketing prices.

It has never been a better time for buyers and investors to take out a loan with interest rates at record lows, however, the focus is on whether borrowers will be able to service this debt once interest rates begin to rise and we move into ‘COVID normal’.

According to the Australian Purdential Regulation Authroity (APRA), high debt-to-income (DTI) ratios are those over six times the applications gross taxable income. Currently, 22% of all new lending applications in the June 2021 quarter were more than six DTI, which is a 50% increase from June 2020, where only 11% of total applications were greater than six DTI.

Statistics show that Australians on average are earning a yearly salary of $83,000 meaning if borrowers were limited to six times their income, they could only borrow just over $500,000.

When looking at the average price of residential properties in Australia, the Domain median national house price is $955,927. The new borrowing cap will mean the average Australian would be priced out of all major capital cities.

It’s expected these DTI limits will impact investors with existing property portfolios and first home buyers trying to maximise their borrowing capacity the most. Although we may see some leniency for first home buyers as the intention behind introducing these DTI limits is to curb speculative investment rather than hamper affordability for first home buyers.

APRA has tightened lending standards twice in the past and on both occasions the property market proceeded to fall 2-8% in the following 12 months, indicating a similar fall in growth may come in 2022.

As a result of the new lending restrictions, it is expected that the local and national housing price growth will slow from 20% in 2021 to 7% in 2022.

 

If you have any questions regarding the new lending restrictions, or would like assistance securing finance, please give us a call on 03 5434 7690 or email endeavor@endeavorbendigo.com.au

home buyer

Federal Budget boost for single parents

Under the proposed Family Home Guarantee, single parents will now be able to purchase a property with a deposit of just 2%, with the government guaranteeing the remaining 18%.

The Family Home Guarantee is limited to 10,000 places which will be spread evenly across four financial years, equating to 2,500 spots per year.

The scheme is open to first home buyers, as well as those who have previously owned a home.

The Family Home Guarantee aims to help single-parent families get onto the property ladder or re-enter the property market. The scheme was announced as part of the 2021-22 Federal Budget.

Eligibility

To be eligible for the scheme, you must:

  • Be a single parent with a dependant(s)
  • Earn less than $125,000 per year
  • Be an Australian citizen
  • Be above 18 years of age.

Apply

The Family Home Guarantee will commence from 1 July 2021, subject to legislative approval. Further information about the scheme will be available over the coming days on the National Housing Finance and Investment Corporation website.

 

In a separate measure, the government has also announced an expansion of the New Home Guarantee scheme with an additional 10,000 places. The scheme allows first home buyers to build a new home, or purchase a newly built home, with as little as a 5% deposit.

 

If you have any questions regarding the Family Home Guarantee, or would like assistance determining if you are eligible for the scheme, please give us a call on 03 5434 7690.

Opportunities in the cooling property market

Things are looking up for first home buyers for the first time in years as house price growth begins to slow across the country. Read more