By Legal Home Loans -
Sponsored content
Over the last two years, the home loan market has been rocked by a series of rates hikes by the Reserve Bank of Australia (RBA). The record-low cash rate of 0.10% held for many months throughout the pandemic now currently sits at 4.35%. The highest target we have seen in over 10 years.
Whilst the RBA have been on a mission to curb inflation back to its target range of 2-3%, there was good news from the recent ABS data that revealed that inflation hit 4.1% for the December quarter (-1.3% drop from the September quarter), which came in below economist expectations, making it unlikely we will see further cash rate rises this year.
In fact, all major banks currently believe we have hit the peak at the current target, which is great news for borrowers who could use some repayment relief. As for when it will drop, that opinion is divided. At the time of writing, both Westpac and Commonwealth Bank are predicting December 2024.
The RBA board will make fewer decisions in 2024, with their meeting schedule moving roughly from every four weeks to every six weeks. The justification being so the board can have more time to weigh up the latest economic indicators before making a monetary decision.
Of course, it’s important to bear in mind that even the country’s top economists don’t hold a crystal ball, it is a particularly dynamic time, and predictions can change from time to time. What they do currently agree on is that the RBA’s moves are working.
So, what does this mean for you and what can you do about it?
1. If you’re looking to buy, expect more competition.
If you’re considering purchasing a property this year, we recommend arranging your pre-approval. As the cash rate eventually drops, it’s anticipated that demand will surge, intensifying competition in an already limited supply market.
Historically, lower interest rates correlate with upward pressure on house prices. Therefore, arranging your pre-approval soon would be prudent to ensure you’re well-prepared. We always recommend this as a first step to gain certainty of your borrowing capacity. This enables you to act swiftly when you find the right property and positions you comfortably to negotiate, armed with knowledge of your upper spending limit.
2. Look out for lender offers if you’re a current homeowner.
For existing homeowners, it’s a good idea to stay across offers from lenders, such as available interest rates and cashback incentives. We’ve seen major lenders reduce their fixed & variable interest rates over recent months, which is likely in response to the potential cash rate drop later this year.
By staying informed about these opportunities and comparing them to your current loan terms, you can make smart decisions to improve your financial situation. We summarise the latest interest rates on offer in the market every week here.
3. Expanding your property portfolio with investments may become a greater reality
Tight borrowing capacity has been the issue many applicants have faced in the last couple of years. If rates do go down, this would mean higher borrowing potential for you, opening doors for more options.
Additionally, lower interest rates typically drive increased market activity, leading to a rise in property prices. This upward trend may boost equity in your home, presenting opportunities for further investment. With increased equity, you’re better positioned to provide a deposit for a possible investment purchase or to make renovations on your current home, improving its value.
Seeking expert mortgage advice?
Remember that not every option will be applicable to your individual financial circumstances and budget. It’s best to speak to a specialist mortgage broker for best advice.
Legal Home Loans specialise in financing for legal professionals of all levels. We have access to all major lenders and private banks and will help you select a loan that best suits your unique situation. Plus, if you’re a member of the Law Society of NSW you receive $500 cash back upon loan settlement.*
Get in touch with our lending experts today.
*Rebate applies to the member’s first loan settled with Legal Home Loans. Legal Home Loans will honour the highest valued rebate that is applicable to the client. Limit of one rebate per loan in the case of multiple qualifying applicants. Loan value must exceed $250,000 to be eligible.
