How will the federal budget affect property and lending?

October 2020 update from Blackwattle Finance

Economic news

The federal budget is the big news this month. The government has outlined their path away from recession, with tax cuts the lead story. There are three major property related measures highlighted: extension of the first home buyers deposit scheme for new homes (10,000 new places), more low-cost financing for affordable housing through NHFIC, and additional funds for the Indigenous Home Ownership Program.

There are also big plans for credit regulations which I will touch on further down.

At Citi’s 12th annual investment conference RBA Governor Philip Lowe hinted at another interest rate cut. Lowe said that “As the economy opens up… it is reasonable to expect that further monetary easing would get more traction than was the case earlier”. He also confirmed that an increase in the cash rate is as least two or three years away – something for mortgage holders to keep in mind when making decisions on loan options.

Property news

September saw a boost in the national housing market, with prices and new listings increasing in all capital cities except for Sydney and Melbourne. Given the size of the Sydney and Melbourne markets (more than half in terms of value) the overall average value came down ever so slightly. This has meant five straight months of decline overall, however the rate of decline has decreased.

Predictions are that October will continue to improve, with Victorian lockdowns easing and the seasonal spring activity driving more activity.  Experts are highlighting "clear optimism" generally.

Lending update

As touched on earlier, there is quite big news.  As part of the federal budget announcement Treasurer Frydenberg has flagged plans to simplify the regulations around lending with the aim to free up credit.  If Parliament agrees to the proposal, we will see the changes come into play in March 2021.  Ostensibly this will make getting a loan more straightforward, with the onus for accurate application information shifting back from the lender towards the borrower. 

My two cents?  Banks will be given a huge task to update processes and policies to fit the reforms.  The size of the task will mean it will take an eon to implement fully and properly, and won’t have the economic impact hoped for.  Still, simplification will be welcomed by many who have found the process of obtaining credit bordering on ridiculous in recent times.  

About half of the 500,000 home loans under deferral of repayments have now recommenced payments.  This is a welcome development which means that the finances of Australian homes are returning to normal.  People who have been unable to refinance into the low rates now available should soon be able to demonstrate repayments and allow them to switch.  Once again, let me know if this is you.

FIRST HOME BUYERS – NOW IS YOUR TIME.  Another 10,000 spots have opened for new dwellings in the federal government’s first home loan deposit scheme.  In short, borrowers who save a 5% deposit will have their loan guaranteed by the government which means no lenders mortgage insurance (LMI) payable.  Combined with stamp duty concessions this means big savings for those of you who have been trying to break into the market.  If you want to see if you’re eligible please let me know.