One mortgage industry figure believes further official cash rate cuts will have little relief for anybody with a home loan... Capital city market heats up as tenants and investors compete...
Warning out of cycle interest rate increases to become more common
While many commentators have predicted the Reserve Bank to reduce the official cash rate before the end of the year, one mortgage industry figure believes it will have little relief for anybody with a home loan.
A reduction of the cash rate on Melbourne Cup day has been predicted for months and 1300HomeLoan managing director John Kolenda believes that is a likely occurence.
“The RBA has some history in playing a part on Melbourne Cup day and we may see the central bank cut rates once more on the first Tuesday in November or before the end of the year,” he said.
While Kolenda is predicting the RBA will lower the cash rate, he doesn't believe lenders will pass the reduction on to consumers, with it more likely banks will raise the intereset rates on home loans as they repond to changing capital requirements.
Kolenda predicts home loan interest rates could rise by up to 0.5%
“The decision of many lenders to raise interest rates for investment and interest only loans as well as revised borrowing conditions has already had an impact on many borrowers with more expected," he said
“We are likely to see increases from 25 to 50 basis points in out of cycle movements by many banks as they adjust their pricing to accommodate additional costs. They face a balancing act between managing home loan growth and shareholder returns.”
Unlike other rate rises seen in recent months, which have targeted investment and interest-only loans, owner occupier loans would also likely be affected
“Over the next six to nine months we may see increases in rates across the board with the pressure on the major banks to meet APRA measures by June next year," Kolenda said.
"This will likely see rates increase for owner-occupied in the future.”
Kolenda's prediction backs the position of UBS banking analyst Jonathan Mott who also believes rates are on their way up, regardless of RBA moves.
Capital city market heats up as tenants and investors compete
It appears Brisbane is becoming popular with more than just investors, with signs that more and more first home buyers are looking to the Queensland capital in their attempts to break into the property market.
According to professionals in the Brisbane real estate industry, the current low interest rate market and a desire to get in before prices sky rocket are encouraging renters to become buyers.
Jasmina Petrovic, joint principal and director of Brisbane real estate agency North South Real Estate, said enquiries from tenants looking to buy have become a common occurrence and the Reserve Bank’s decision this week to keep the cash rate on hold will make the Brisbane market even more attractive to home buyers.
“This is especially true for the rental market, with many of our agents consistently being contacted by long term renters who are keen to enter the property market,” Petrovic said.
“With [Tuesday’s] announcement that interest rates will remain on hold until November, agents can expect to see an increase in the number of groups through open homes,” she said.
As low interest rates encourage people to buy, Petrovic said prices in Brisbane are moving up and in turn Meighan Hetherington, director of Property Pursuit Buyer’s Agency, believes that growth is also tempting renters to make the switch.
“We’re definitely seeing people who typically were long-term renters really start to look at buying,” Hetherington said.
“I think a lot of them are looking at the market now and thinking this is their chance to get in before the prices really start to rise,” she said.
Hetherington said the changing attitude of many renters in the city has caused demand for rental properties to fall, but she said that doesn’t mean Brisbane isn’t a viable investment opportunity.
“As tenants look to buy, we are seeing less competition for rentals and we’re definitely down from when competition for rental properties peaked in 2013. As a result yields are starting to suffer,” she said.
“That hasn’t put off investors though, they seem to be very happy to buy for the capital growth and ride through the softening yields and wait for that to turn around again.”
While there are good capital growth opportunities to be had, Hetherington warned investors, especially those from interstate, that not all of Brisbane offers the same favourable conditions.
“A lot of what are the popular areas, particularly with investors from interstate, aren’t the ones that have the best growth potential.
“Of the 159 suburbs in Brisbane, we’ve identified 58 that have investment potential and then across that there are only certain properties that will do well.”
As the city sees a boom in new apartments coming online, investors looking at Brisbane should consider the city as more than one market.
“You really need to split it into separate markets, detached houses and townhouses are doing well and still have a strong upswing to go through, however it’s definitely not the same for units,” Hetherington said.
“I think what we’ll see with the large number of units popping up at the moment is that they’ll sell off the plan for quite reasonable prices, however when it comes that people want to resell in five years or so they’re going to see a fair bit of capital loss.”
While many commentators have predicted the Reserve Bank to reduce the official cash rate before the end of the year, one mortgage industry figure believes it will have little relief for anybody with a home loan.
A reduction of the cash rate on Melbourne Cup day has been predicted for months and 1300HomeLoan managing director John Kolenda believes that is a likely occurence.
“The RBA has some history in playing a part on Melbourne Cup day and we may see the central bank cut rates once more on the first Tuesday in November or before the end of the year,” he said.
While Kolenda is predicting the RBA will lower the cash rate, he doesn't believe lenders will pass the reduction on to consumers, with it more likely banks will raise the intereset rates on home loans as they repond to changing capital requirements.
Kolenda predicts home loan interest rates could rise by up to 0.5%
“The decision of many lenders to raise interest rates for investment and interest only loans as well as revised borrowing conditions has already had an impact on many borrowers with more expected," he said
“We are likely to see increases from 25 to 50 basis points in out of cycle movements by many banks as they adjust their pricing to accommodate additional costs. They face a balancing act between managing home loan growth and shareholder returns.”
Unlike other rate rises seen in recent months, which have targeted investment and interest-only loans, owner occupier loans would also likely be affected
“Over the next six to nine months we may see increases in rates across the board with the pressure on the major banks to meet APRA measures by June next year," Kolenda said.
"This will likely see rates increase for owner-occupied in the future.”
Kolenda's prediction backs the position of UBS banking analyst Jonathan Mott who also believes rates are on their way up, regardless of RBA moves.
In depth: Industry changes are a plus for brokers
Top Broker's Joshua Vecchio explains how to prepare yourself to make the most of the raft of changes in the lending market.
Top Broker's Joshua Vecchio explains how to prepare yourself to make the most of the raft of changes in the lending market.
Capital city market heats up as tenants and investors compete
It appears Brisbane is becoming popular with more than just investors, with signs that more and more first home buyers are looking to the Queensland capital in their attempts to break into the property market.
According to professionals in the Brisbane real estate industry, the current low interest rate market and a desire to get in before prices sky rocket are encouraging renters to become buyers.
Jasmina Petrovic, joint principal and director of Brisbane real estate agency North South Real Estate, said enquiries from tenants looking to buy have become a common occurrence and the Reserve Bank’s decision this week to keep the cash rate on hold will make the Brisbane market even more attractive to home buyers.
“This is especially true for the rental market, with many of our agents consistently being contacted by long term renters who are keen to enter the property market,” Petrovic said.
“With [Tuesday’s] announcement that interest rates will remain on hold until November, agents can expect to see an increase in the number of groups through open homes,” she said.
As low interest rates encourage people to buy, Petrovic said prices in Brisbane are moving up and in turn Meighan Hetherington, director of Property Pursuit Buyer’s Agency, believes that growth is also tempting renters to make the switch.
“We’re definitely seeing people who typically were long-term renters really start to look at buying,” Hetherington said.
“I think a lot of them are looking at the market now and thinking this is their chance to get in before the prices really start to rise,” she said.
Hetherington said the changing attitude of many renters in the city has caused demand for rental properties to fall, but she said that doesn’t mean Brisbane isn’t a viable investment opportunity.
“As tenants look to buy, we are seeing less competition for rentals and we’re definitely down from when competition for rental properties peaked in 2013. As a result yields are starting to suffer,” she said.
“That hasn’t put off investors though, they seem to be very happy to buy for the capital growth and ride through the softening yields and wait for that to turn around again.”
While there are good capital growth opportunities to be had, Hetherington warned investors, especially those from interstate, that not all of Brisbane offers the same favourable conditions.
“A lot of what are the popular areas, particularly with investors from interstate, aren’t the ones that have the best growth potential.
“Of the 159 suburbs in Brisbane, we’ve identified 58 that have investment potential and then across that there are only certain properties that will do well.”
As the city sees a boom in new apartments coming online, investors looking at Brisbane should consider the city as more than one market.
“You really need to split it into separate markets, detached houses and townhouses are doing well and still have a strong upswing to go through, however it’s definitely not the same for units,” Hetherington said.
“I think what we’ll see with the large number of units popping up at the moment is that they’ll sell off the plan for quite reasonable prices, however when it comes that people want to resell in five years or so they’re going to see a fair bit of capital loss.”
In depth: BDM in the spotlight: Clayton Myers
This Australian Financial BDM for Queensland was a rigger/dogman for Telecom
This Australian Financial BDM for Queensland was a rigger/dogman for Telecom
