Mortgage rates are on the rise: It’s time for homeowners and first time buyers to consult their broker about a loan refinance and mortgage solutions
Scouring the internet for info on interest rate rises, mortgage rates today or feverishly Googling ‘homes for sale near me’? Don’t. A great mortgage broker sorts the good moves from the bad for you.
Big changes in the housing landscape do matter when they have immediate and short term repercussions for people. However, most people have a limit on how many things they can adjust in response. If you’ve been soaking up the headlines over the last couple of years, the more honest answer is that it might not matter quite as much as you think in the long-term once you’ve done what you can – and Newy Finance can certainly help with that.
There are plenty of burning questions as the housing market temperature starts making us perspire:
- Are shifting housing policies and interest rates going to make it harder to crack the market?
- What’s are the new government’s proposed 2022 housing grants, schemes and policies?
- Is my home value going to drop while my mortgage repayments soar?
- Can I refinance my mortgage, and would I get better deal?
- Should I use my superannuation for a house deposit?
- Will I be able to service my current or future mortgage?
- Things have changed so much, what do I need to get a home loan?
- When is the best time to buy my first home in this housing market?
It’s a lot to have on your mind, but talking it out with an experienced and determined mortgage broker will set a good chunk of it at ease.
When will Australian house prices crash? Don’t bet on it
While house prices are predicted to decline in 2022, the size and speed of the theoretical drop is not fast enough for many hopeful first home buyers. Homeowners already invested are dreading the possibility of negative equity and mortgage stress, so few people are left unaffected.
There’s a no-win situation playing out across the nation and absolutely nobody in finance, government or economics is shocked. The housing market has been cooking up a storm for years, and while the COVID-19 pandemic turned up the gas – the situation isn’t new.
Many qualified authority figures and academics make predictions and statements that never land. Bubbles have been predicted and never burst. First home buyer’s schemes have been introduced and had a bigger impact on prices than increasing Australian owner-occupier rates.
Australian housing affordability and getting your first mortgage
The time it takes to save the recommended 20% deposit continues to stretch out. A look at the latest Housing Affordability Report by CoreLogic reveals it now takes first home buyers almost 12 years to save that much for a home in the median price bracket of around $750, 000. That’s a figure lower than the average price of a home in Australian cities where the majority of our population lives.
It can all sound pretty gloomy for those trying to crack into the housing market for the first time on their own, and current mortgage holders are equally anxious about rising interest rates. A new government, a host of global crises and an economy struggling to keep up enough to recover has generated some extra uncertainty to top it off. It can seem hard to see a clear path when the goal posts appear to keep moving so frequently.
Let’s take a brief look at how we got here, how long it’s going to take to equalise and the practical strategies and solutions available to clients. Because if you know anything about Newy Finance and Jon Jones – you know that he’s going to bat for you like it’s his problem.
You’ve already got a mortgage, so what happens when interest rates rise? What can you do about it?
This is not an unnecessary sales opportunity, this is a mortgage health check. The first and most important thing you can do is book an appointment with your mortgage broker and get up to date on your financial position. While Newy Finance will always ask all the right questions, the more prepared you are. Securing the best possible solution in the least amount of time is pretty critical right now. For mortgage holders living through an interest rate hike in a fluctuating economy, time is of the essence.
Some obvious mortgage management options to explore for successfully sailing choppy economic waters include:
- Fix the interest rates on your mortgage before they rise further
- Explore the options for refinancing your mortgage to get a lower variable interest rate
- Use an offset account to make extra repayments on your loan, to reduce interest accrued ahead of time and create a comfortable buffer
- Reduce and consolidate debt outside of your mortgage such as credit cards, buy-now-pay-later accounts, personal loans and car loans
- Refinance any personal loans and car loans you may have to a lower fixed rate
- Get your household budget up to date by identifying your personal finance position. Itemise and total your living expenses and debts, so you can see where you can cut expenses first and see clearer opportunities to save money
It might not be possible for you to take action on all of the suggestions above, but that’s what a great mortgage broker can give guidance on. If they have invested the time to get to know you properly, they’ll already know what is feasible and what isn’t. They’ll know every hoop to jump through to get it done.
Property affordability, where the bloody hell are ya? Is it too far gone to save the Australian dream?
Australia’s housing market didn’t get where it is overnight, it took over two full decades – house prices rose approximately 88% between 1990 and 2000, with a further increase of around 23% between 2010 and 2020 according to trusted data sources like the Reserve Bank of Australia. Like most things that take that much time to reach a critical point, they require a decently long time to solve.
Sometimes bad news is good news too, and on the 5th of May 2021, the NSW Government released a housing strategy policy for the first time in history. The title of the document makes the real pace of change clear for most Aussies: ‘Housing 2041 – NSW Housing Strategy’.
The bad news is that it’s a long road to recovery – there’s always some unplanned ‘scenic routes’ along the way that may push out that 2041 goal – but the good news is that there’s plenty to be done and time to do it.
Patience is a virtue, especially when it comes to real estate
The lesson of patience has always been an important one and it’s especially true today for many nervous aspiring and current Australian Dream holders. At the risk of sounding patronising, FOMO and panic are waste of time here. When your choices are limited by forces beyond your control, you just have to do your best and ride it out. So make a plan, crack a cold one and sit back.
No one is pretending the current climate is stress-free and it feels like an unfair go. Especially when you compare the average house price in Australian to current cost-of-living and median wages, and the same housing affordability data just 25 years ago.
But there is a silver lining here. You have time to get where you want to be. Don’t get sucked into a spiral of despair just yet, there’s absolutely action you can take.
Secret sauce ingredient: hire a human home loan calculator
When it comes to getting a recipe just right, too much or not enough of core elements just leaves a bad taste in your mouth. Of course qualified professional advice is a key component, and you make up the rest. What you do with that advice is more than half the battle.
Let’s break down the main drivers of success to surviving and thriving in the Australian housing market.
Get professional advice
Navigating the financial world without experience often results in less-than-ideal choices that at best set you back a little, and at worst leave you totally stuffed. However, if you don’t put the time in to make sure you find a reputable mortgage broker or you never follow it to begin with – you’re stuck in the ‘all talk and no action’ phase.
Dreams don’t come true simply by talking about it. Once you have the expert advice, use it to create a plan that is achievable. Sticking with long term plans means setting reasonable goals.
Make the plan and follow it
Wrapping your head around the housing market, a mortgage, loan inclusions and the different finance knowledge needed to make it happen is no small learning curve. There are many separate pieces of the puzzle that need to fit together, plenty of which aren’t common knowledge outside of financial circles. Once you create a solid plan with your broker and financial advisors, don’t allow day-to-day distractions to lead you off-course. The schemes, policies, rates and house prices will always move. You won’t be in a position to adjust a plan if you didn’t settle on one to begin with.
Stay informed about future risks and opportunities
Doing your own research regularly to stay informed about opportunities and risks to your plan is just great practice, as long as the sources you consult are trustworthy and any decisions you make are run by your mortgage broker first. Being actively engaged in the process makes it enjoyable, empowers you through increased knowledge and most importantly – keeps your eye on the prize.
Set realistic goals to create a plan you’ll stick to
Use all the tools at your disposal without making unmanageable sacrifices. Once you’ve got fresh advice, follow your plan until you have a reason to reassess it. If you have a mortgage broker who knows their business, they’ll be actively observing the market and managing your interests by alerting you for the need to switch gears. When you start doing your own research they’ll also be happy to help you increase your knowledge by answering any questions that pop up – great advisors are also great teachers.
The best mortgage broker is one who listens first, clever actions and management rely on it
We get it – It’s all a bit much after a shocker of a 24 months. Keep your chin up though, a great strength the financial industry has is the ability to be incredibly agile to match the pace of changing conditions when they need to.
However, not every mortgage broker is created equal. We’re all human and that can mean a different appetite for creative strategy, staying informed on the latest updates and the diversity of the lenders they use (also known as their aggregator pool). And not to be overlooked – the best broker is one you make a great connection with, because from that flows quality communication.
Hunt down a stand-out operator through real recommendations and demonstrated results. Check online reviews and ask people you know and trust to be a good source of knowledge on the subject. That will reassure you that they’re a professional with enough experience to truly listen to their clients. Custom mortgage advice isn’t an online form. It’s a discussion with a real human that will take the time to get to know you and your goals properly.
Exceptional mortgage brokers move just as fast as the market to keep their clients on the front foot. If your mortgage broker is on top of their game and connects with you on a personal level like Newy Finance does, the overall answer to an overheating housing market and home loan is a simple one: find a broker who will crank up your air conditioner to the perfect temp while they install your insulation upgrades. So go on then – give Jon a buzz or get in touch by shooting through an enquiry online and sit back.