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Property: Cities where you can still snap up a bargain on housing in Australia revealed

Rising interest rates might be putting off some people from purchasing a property amid fears they cannot afford the mortgage stress.

But whether you are looking for a house to make your home, or an investment property, there are still some bargains to be found across Australia.

Real Estate Institute of Australia president Hayden Groves told NCA NewsWire markets like Sydney, spurred on by low interest rates and economic stimulus, had experienced rapid price gains of about 30 per cent in 2021, peaking earlier this year.

“Other east coast markets have performed similarly well and are now beginning to moderate as affordability constraints impact,” he said.

“In contrast, the markets of Perth and Darwin, since early 2020, have underperformed comparative to east coast cities.

“They are now enviable, more affordable and continue to grow thanks to migration-led demand, strong economies and tight housing supply.”

Mr Groves observed that in the hyper-inflated markets of Sydney and Hobart, prices were beginning to rationalize due to buyer uncertainty.

“Brisbane’s market remains buoyant thanks to migration pressures fueling demand, whereas Adelaide continues to perform well thanks to the flow-down effects from relocations from higher priced regions across Melbourne,” he said.

“Price rises have already reversed in Melbourne, Sydney and Hobart, while Perth and Adelaide remain strong off the back of more constrained growth.”

Mr Groves said Perth remained the most affordable capital in Australia.

“Average mortgage holders part with around 24 per cent of their wages to service their loans,” he said.

“Compared this to Sydney-siders who currently give up on average 46 per cent of their salary to meet their mortgage payments.

“Median house prices in Perth are about $550,000, less than half that of Sydney’s median prices and well below Hobart, Brisbane and Adelaide.”

Darwin and some major regional city areas in eastern Victoria, north Adelaide and northeast Tasmania also offered good value, Mr Groves added.

He noted interest rates remained low and were coming up from “emergency” levels.

“It is good news that Australian property markets head back to a more balanced environment, although as housing supply remains below underlying demand, property values ​​are likely to retain much of their gains experienced since early 2020,” he said.

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Interest rates: Peter White urges borrowers to beware of the hidden dangers associated with refinancing following RBA rate rise

A leading loans expert is urging mortgage holders to be wary of the hidden dangers associated with refinancing as the big four banks look to entice more customers with “cheap deals” following this month’s rate rise.

Peter White AM, the managing director of the Financial Brokers Association of Australia (FBAA), is asking Australians who are considering whether they should switch up their home loan to proceed with caution, warning that “cheaper isn’t always better”.

The director’s message comes after the Reserve Bank of Australia increased the cash rate by 50 basis points for the fourth time in as many months on Tuesday.

With the base rate now standing at 1.85 per cent, Mr White is asking borrowers to be on alert as major banks look to lure vulnerable customers who are struggling with their repayments to sign up to its services.

“Some banks at the moment are offering cheap variable rates to new borrowers only. This is a trap,” Mr White told news.com.au.

“For the lender it’s about using a marketing budget to generate more customers, knowing that most customers will stay as it costs to change again.”

It’s all part of a “vicious cycle” lenders use to draw customers into borrowing from them, Mr White explained, where new customers are blindsided as the rate on offer doesn’t always mean the customer will be better off in the long term.

“There is a hidden danger at times like this that is rarely spoken about,” Mr White said.

“Banks will be looking to attract those considering refinancing as new customers, and will offer cheaper variable interest rates that are significantly below their fixed rates, which are rapidly climbing. This is a case of ‘buyer beware’.”

Cashbacks and exclusive rates at discount prices for new customers are some of the lures banks are using to attract new borrowers.

Both come at the cost of disadvantaging the lender’s current customer base as their higher interest rates make up for the lower rate offered to new customers.

“Borrowers should be aware that next time around they will be the existing customer facing higher rates and will be disadvantaged during rate increases,” Mr White said.

“It’s an old game to lure new customers with a perceived advantage only to be taken advantage of with the next move.”

Additionally, some banks use a tactic where they attempt to give you a better rate after you’ve agreed to another offer.

“If they were serious about looking after you they would have offered this when you first approached them, so ignore this offer and don’t be distracted as this will cause you even more headaches, and makes the process even more complex,” he said .

While Mr White advises borrowers to refinance with caution, saving on your home loan isn’t entirely off the cards.

Rather than focusing on the big four banks, Mr White recommends looking at what second tier banks such as Suncorp, and non-banks such as Bluestone, have on offer.

“Going with the major banks is often the most expensive way forward and may not be in your best interests due to constraints and other factors specific to you,” Mr White said.

“Remember the big banks can only sell you their products, and their aim is to look after themselves and their shareholders, not to act in your best interests.”

It’s also advised that borrowers go through a mortgage broker, rather than directly through a bank. Brokers are free to use as they receive commission from lenders once they sign a customer up to a service.

They also have access to a range of offers that aren’t always available to borrowers who go through the back directly and can find a rate and repayment schedule that suits a borrower’s needs.

“A finance broker is obliged to act in your best interests and sometimes this means explaining that the best option may be not to refinance,” Mr White said. “(They’re also) charged by law to act in your best interests, whereas banks are not.”

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Australia

Interest rates: RBA raises cash rate by 50 basis points to 1.85 per cent

For the fourth consecutive month the Reserve Bank of Australia (RBA) has hiked interest rates as inflation runs rampant.

At 2.30pm during the RBA’s monthly meeting, it increased Australia’s interest rate by 50 basis points, or by 0.5 per cent.

The decision brought the cash rate from 1.35 per cent to 1.85 per cent, largely in line with economist’s predictions.

This marks the first time the RBA has lifted the rates for four months in a row since the introduction of the two to three per cent inflation target in 1990.

This follows last week’s increase in annual inflation, which hit 6.1 per cent, which was its highest level in 21 years since 2001.

Tuesday’s rate rise means those paying off the average home loan of $500,000 will need to cough up an extra $140 a month.

And the August hike isn’t expected to be the last, with economists forecasting that interest rates could peak up to two per cent by the end of the year.

As soon as news of the interest rate rise broke, Treasurer Jim Chalmers weighed in and acknowledged it was a tough time for Australian borrowers, saying the announcement would “sting”.

“It’s another difficult day for Australian homeowners with a mortgage,” he said.

“The independent ReserveBank has just announced its decision to increase interest rates by another 0.5 per cent, bringing the cash rate to 1.85 per cent.

“Australians knew this was coming, but it won’t make it any easier for them to handle.

This cycle of interest rate rises began before the election in response to inflationary pressures that began accelerating at the beginning of this year.

“Average homeowners with a $330,000 outstanding balance will have to find about $90 a month more for repayments as a consequence of this decision today, on top of around $220 extra in repayments since early May.

“For Australians with a $500,000 mortgage, it’s about an extra $140 a month, in addition to the extra $335 they’ve had to find since early May.

“As I said, Mr Speaker, this decision doesn’t come as a surprise. It’s not a shock to anybody, but it will still sting.

“Families will now have to make more hard decisions about how to balance the household budget in the face of other pressures like higher grocery prices and higher power prices and the costs of other essentials.”

‘Misleading’: Calls for bank boss to resign

Ahead of the interest rate rise, there were growing calls for the RBA’s board and its governor, Philip Lowe, to resign after a series of missteps.

Chief among them was the promise that interest rates wouldn’t rise until 2024 which one top economist said was “misleading” for borrowers.

Critics also pointed out that the rapid rate rises could inadvertently lead to a recession while at the same time inflation is running rampant.

Warren Hogan, chief economist at both ANZ and Credit Suisse, told The Daily Telegraph that the RBA was guilty of some “pretty bad errors” in recent months.

The RBA lowered the cash rate to 0.1 per cent at the end of 2020 amid the Covid-19 pandemic – the lowest it had ever been – and throughout the pandemic said they didn’t plan on raising the cash rates until 2024.

When it lifted the cash rate for the first time in May and then every month since, Mr Hogan said it was “misleading people, basically”.

He also said Australia’s central bank had taken on risky strategies including spending lots on insurance and sinking funds into a bonds program which had not paid off.

Mr Hogan, who was also the former principal adviser to federal treasury, said: “It’s unforgivable. I think they should resign – the whole board.”

Mr Lowe “should have the character to stand down,” Mr Hogan added.

RELATED: Find out how much the rate rise will cost you

Mr Lowe said the cash rate would remain at its record low of 0.1 per cent until at least 2024, but the rapid rise in inflation this year – caused in part by Russia’s war in Ukraine and supply chain issues on home soil – prompted the monthly hikes .

It comes as Australia’s cost of living crisis is worsening, making borrowers even more cash-strapped than usual.

In the last quarter, transport costs rose 13.1 per cent as the price of fuel rose to record levels for the fourth quarter in a row.

Meanwhile, grocery shopping is also causing hip pocket pain, with Australians outraged to find lettuce heads selling for $10 a pop and capsicums marked at $15 for a kilo.

Interest rates in Australia reached an all time high of 17.5 per cent in January 1990. Since then, they have averaged 3.93 per cent.

Before this year, the last time the RBA hiked up rates was in 2010. It has only been going down ever since.

As a result, more than one million home borrowers have never experienced an increase in mortgage rates, because they bought a home after 2010.

The official cash rate has been at a record low of 0.1 per cent since November 2020 in response to the Covid-19 pandemic until May 2022.

– with NCA NewsWire

Read related topics:Reserve Bank

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Business

Economy: Winners of rising interest rates revealed

Homeowners and renters are bracing for more bad news with interest rates tipped to rise again, but there are some people who are benefiting more than others.

Household budgets are being stretched to their limits after inflation hit a massive 6.1 per cent and cost of living pressures, including the prices of groceries and fuel, continue to mount.

But financial experts say some parts of the community are enjoying economic success during this difficult time.

So who are the winners of rising interest rates?

Financial planner and Edith Cowan University lecturer Damon Brown told NCA NewsWire there were two big winners — withdraw and people who locked in fixed rates before the cycle changed.

“Retires who are invested in cash have been doing it tough for the past five years because interest rates on their cash have been very low and below what Centrelink deems them to be earning,” he said.

“For the older people Centrelink deems them when it comes to their the age pension they can receive.

“So it’s called deeming, which is what the Centrelink assumes they can earn from their money, but they might not actually earn that money.

“An example might be my mother who invests all her money in cash. She’s been receiving one per cent interest rate for the last few years but Centrelink assumes that she earns a bit more than that. And so she’s receiving less Centrelink entitlement.”

Mr Brown said people who locked in fixed rates before the cycle changed, like him and his wife who secured a rate just under two per cent, were also doing well.

“We actually locked in for three years a year ago, so we’ve still got another two years to take the big difference,” he said.

Daniel Kiely, a senior research fellow at the Bankwest Curtin Economics Center, told NCA NewsWire rising interest rates were not necessarily a bad thing.

“If the increase in interest rates that we are seeing both in Australia and in other global jurisdictions flow through to the economy, and in turn lead to lower inflation, we will all be winners in the long-run.” he said.

“Lower inflation will make it more unlikely for a global recession to occur.”

In the shorter-term, Dr Kiely said savers would get higher returns on their savings accounts, but the speed at which this occurred would vary from bank to bank and depending on the type of savings account.

“Withdraw may benefit too, if savings supplement another source of income such as a pension,” he said.

“However, for savers and retirees to see the full benefit of such returns, inflation will need to come down substantially.”

Dr Kiely said there was a double edge sword for potential homeowner investors.

“Higher interest rates may stem house price increases and help those saving for a home,” he said.

“But, higher interest rates will also reduce borrowing capacity for many wishing to enter the housing market.”

LCI Lending partner Domenic Romeo said there were still more losers than winners.

“However, the people who have savings in a term-deposit or savings account will benefit from higher interest income rates,” he said.

“Some property investors may find themselves in a better position to purchase a property, due to the softening property prices too.”

In this month’s Finder RBA Cash Rate Survey, 26 experts and economists agreed the cash rate would change on Tuesday, with 23 of them predicting another increase of 50 basis points.

That would bring the cash rate to 1.85 per cent in August.

“A 50 basis point rate increase will see the average Aussie homeowner forking out an additional $610 per month compared to what they were paying four months ago,” Finder’s head of consumer research Graham Cooke said.

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