Interest rates Vs Home Loan Affordability
(Sydney New South Wales Australia)
Sydney is Australia’s most expensive city and the world’s third least affordable city to buy or rent a home. The 'Housing Affordability in Australia - Good house is hard to find' report stated that "the average house price in the capital cities is now equivalent to over seven years of average earnings; Sydney and Melbourne, which are the least affordable capital cities in Australia, are also ranked 3rd and 6th globally in terms of unaffordability by the Demographia International Housing Affordability Survey.
New South Wales is home to Australia's largest population. The cost of property in the capital city, Sydney, remains high, so finding a home loan is an important .The median weekly rent for a house in Sydney is $500 and the median price to purchase a home is $642,000. Compare this to the much more affordable Melbourne where median rent is $360 and the average house is $531,000.
Based on nominal data from Housing NSW, State house prices have increased significantly over the last two decades. Since June 1990, the median NSW dwelling price (for all dwellings) has increased by $339,000 (262 per cent). Dwelling price growth in NSW has been most pronounced in the Greater Sydney region. For example, between June 1990 and June 2013, the median dwelling price in the Inner Ring of Sydney increased by $555,000; prices in the Middle and Outer Rings of Greater Sydney grew by $455,000 and $332,000respectively.
The most widely reported measures of home loan affordability in Australia are the Real Estate Institute of Australia Home Loan Affordability Indicator, the Commonwealth Bank of Australia–Housing Industry Association Housing Affordability Index, and the BIS Shrapnel Home Loan Affordability Index. All three indexes show that home loan affordability has fluctuated considerably in the last two decades; and while affordability improved between 2010 and 2012 following a decline in interest rates, affordability remains relatively weak on a longer term historical basis. Also, these indexes are not entirely up to date.
Housing might seem affordable at first glance, but record low interest rates won't be here forever (well who knows; there isn't a crystal ball). With interest rates at the bottom of the easing cycle and price growth expected to continue, the affordability problem is unlikely to improve significantly in the next few years. When these low rates inevitably start rising back towards average levels, (crystal ball prediction) which could well begin later this year maybe not.
If you can afford to buy into the Sydney property market don't delay, you may need to speak to your accountant or financial adviser about investment properties or using your superannuation and using that for the investment for your property.
The smart thing to do would be to buy in ASAP how ever you can, because this will benefit you long term goals.
With luck, rising interest rates may also coincide with a strengthening of the weak wages growth of late, giving people bigger incomes to offset their higher repayments
Underlying demand for new dwellings is driven primarily by population growth which comes from the combination of natural increase (births less deaths) and overseas/interstate migration flows. Despite relatively subdued income and employment growth since the GFC, housing demand in NSW has remained strong as a consequence of rapid population growth and rising affordability on the back of lower mortgage rates. On the other side of the equation, housing supply growth has been limited (Section 4). As a result, there is an excess demand for dwellings.
Mortgage repayments According to the HIA Economics Group (2013), economic theory holds that the relationship between mortgage servicing costs and household income should remain largely stable over time and that any significant deviation from its long term tendency may indicate an imbalance. For this reason, mortgage repayments represent a useful affordability indicator, and when taken as a proportion of earnings, they incorporate prevailing house prices and interest rates into one measure.
What is certain is that Australian housing isn't affordable unless you're betting the house on rates staying at record lows for decades, and that's a very risky financial move
Statistics on the Australian Bureau of Statistics websites (Average Weekly Ordinary Time Cash Earnings, Full Time Adults, Original, and May 2014) shows that the average weekly earnings of men are $1400 and that of women is $1250. Most individuals can’t afford into the Sydney property market. In the case of Family, where the husband earns $1400 weekly and the wife earn $1250.
Your dream of buying your first house is just as possible if planning of savings is made and you can show a minimum of 6 months of savings the bank lenders would no doubt say yes depending on your deposit saved amount and the purchase price. Most banks need a minimum of 10% deposit with savings to prove you saved that amount.
If you can have a 20% deposit you will save more because of two reasons, first reason is you will not pay LMI insurance and that will save at the least $15000 and you don't need to show your savings for 6 months.
However, in the case where individual earnings are low. Home loans broker can assist in planning for the dream home.
Purpose of Using Home Loans Brokers
- Assess your circumstances: Your mortgage broker will determine the best loan product for you based on your needs, circumstances and financial situation. They also offer recommendations
- Find you a suitable home loan option
- Manage the process
- Provide guidance and direction
Important Notice to First Home Buyers
- Minimum 6 months of savings
- Minimum of 10% deposit of the purchase price or the amount you wish to borrow.
- Have a clean credit history; you can always do a Veda credit report check.
- Minimum of 6 months of employment at the same employee.
- Have current pay slips
- Start planning early on your saving history.
- Keep your credit history clean; keep all your bills up to date.
- Cancel your credit cards
- You can consolidate your car loan into the home loan.
If you can keep these above points you can almost guarantee your dream home.
Give Gorila Loans a Call! NOW !
If there are some of the above points that concern you and you may have a problem in some of the above points give Gorila Loans a call to discuss your circumstances and how we can plan to resolve the problem areas.
Nearly half of Australian home buyers now use a mortgage professional to find them the home loan that best suits them.
Gorila Loans have the expertise, the contacts and experience to ensure you get the right loan for you. Furthermore they take on the leg work so you don’t have to.
Your mortgage professional Gorila Loans will:
- Discuss your existing situation, your lending needs, requirements, and obtain all necessary information pertaining to your lending application.
- Explain the types of loans available to you from a range of banks and specialist lending institutions.
- Based on information provided by you and utilising specialist lending software, match your lending requirements to a selection of loan products offered by a diverse range of lenders.
- Provide an overview of the relevant costs associated with your loan application.
- Provide an in-depth overview of the relevant costs associated with your loan application.
- Act as an intermediary between you and the lenders by completing and packaging your loan application.
- Liaise with your solicitor, real estate agent, accountant and any other related party to ensure a smooth and timely settlement.
- Assist with any future lending requirements, whether you wish to check, change or top-up your loan
Let Gorila Loans Be your Finance Broker, Because WE CARE and we want to be the best in the Finance world !