Free to take a plunge
Steady interest rates, a flat market and competitive lenders could unlock home ownership, reports Ben Hyde.
MORE favourable buying and lending conditions are set to benefit prospective homebuyers and investors for the rest of the year, industry experts say. The combination of steady interest rates, minimal growth in property prices and increasing competition between lenders could also help unlock home ownership.
Many economists and lenders are predicting the Reserve Bank will sit on its hands in the short term and lift rates only once or twice for the rest of the year.
BankSA general manager Chris Ward says the Reserve Bank is likely to keep official interest rates where they are for the next few months, although it will be carefully watching inflation and wages growth.
‘‘Later in 2011, the RBA is likely to increase rates, with August the most likely time for a rise of 0.25 percentage points,’’ he says.
Assured Home Loans chief executive officer Gary Williams says the increasing competition between lenders is filtering through to create better results for consumers. ‘‘The main change is the ability to change lenders now that it is a hot subject in regard to the exit penalties,’’ Mr Williams says.
‘‘The bigger lenders are now giving larger discounts, especially in the first year, as well as a larger ongoing discount from there on.
‘‘We have also seen many of the lenders dipping into their own pockets to pay for some of the fees to switch over. This is definitely a win-win for the consumers.’’
Mr Williams says lending criteria remains tight after the global financial crisis but some institutions show tentative signs of loosening up.
‘‘The lenders will now lend to a higher ratio and in some cases they will go up to 97 per cent of the property value,’’ he says.
‘‘But with more risk comes more scrutiny. So if you want to borrow up to 97 per cent, you will need to be at your place of employment for a good length of time and have also saved regularly into a bank account with proof of finances.’’
Police Credit Union executive manager of product and marketing Paul Modra says lenders are being innovative to capture market share.
‘‘Innovative product offerings could include offering interest-only repayments for owner-occupied loans to lessen borrowers’ monthly repayments,’’ he says.
‘‘With house prices tipped to remain relatively stable, it is still a great time for people to enter the housing market as the outlook for employment remains strong and interest rates are only predicted to increase gradually.’’
Mr Ward says the home loan market is very competitive and there are some great home loan offers available to those looking at buying property.