WITH interest rates expected to head north this year — and the banks to follow suit — you’ll need to know to beat them at their own game.
Online mortgage marketplace HashChing and independent consultancy Digital Finance Analytics have shared their top eight mortgage predictions for 2018.
Here’s your very own home loan cheat sheet:
1. MORTGAGE INTEREST RATES TO KEEP RISING
If you’re looking to buy a home or refinance your mortgage, aim to get it finalised sooner rather than later because the consensus among HashChing brokers is that the major banks will continue to nudge interest rates higher.
HashChing broker George Kozah said the average home loan standard variable interest rate of 5.08 per cent (according to Finder.com.au) could rise about 75 basis points to 5.83 per cent by the end of the year.
Most economists also expect the Reserve Bank to lift the official cash rate from its record low of 1.5 per cent in the second half of this year.
2. FIXED RATE DEALS IN FOCUS
There will be a greater mix of very low “special” rates to try and attract first time buyers and owner-occupied refinanced business.
Many lenders will focus on fixed rate deals, taking account of lower funding rates, but this may change later in the year in line with a strong likelihood that the Reserve Bank will lift the official cash rate.
3. MORTGAGE LENDING STANDARDS TO TIGHTEN FURTHER
First home buyers will need to stump up a bigger deposit to get into the market, according to Digital Finance Analytics principal Martin North.
“As a result, I expect more first time buyers will get help from the “Bank of Mum and Dad”, which can be worth as much as $88,000,” he said.
4. MORTGAGE STRESS TO AFFECT MORE HOUSEHOLDS
Digital Finance Analytics reports that mortgage stress affects more than 921,000 households nationwide.
This could climb to more than one million by the end of 2018.
DFA attributes the problem to rising living costs, slow wage growth, and larger mortgages (due to rising home prices).
5. MORE BORROWERS TO DITCH THE BIG FOUR BANKS
More borrowers are likely to refinance their home loans away from the big four banks this year.
This trend was demonstrated last year using data from HashChing which showed the greatest exodus (37 per cent of national borrowers with the big four banks) from Commonwealth Bank.
With smaller lenders offering variable rate home loans as low as 3.56 per cent, it might be time to jump ship.
6. PROPERTY PRICES TO CONTINUE TO COOL
Tougher lending restrictions on investors and interest-only loans has increased housing supply, leading to a slowdown in property prices in Sydney and Melbourne.
The national median house price index fell to 0.3 per cent in December, according to CoreLogic data, and this trend is expected to continue in 2018.
New residential construction is likely to stay strong, as recent building approvals flow through, but there will be a fall in the number of high-rise units released to the market — especially in Melbourne and Brisbane.
7. THERE WILL BE MORE FIRST HOME BUYERS
Softening property prices, greater housing supply and government grants/stamp duty concessions (in states such as NSW, Victoria and Queensland) will see more first home buyers enter the market in 2018.
In the first week of the year, HashChing noticed a considerable uptick in web traffic, with a 12 per cent increase in home loan inquiries from first home buyers compared to the same time last year.
8. MORTGAGE BROKERS TO CONTINUE TO SETTLE MOST MORTGAGES
The latest industry data shows Australian mortgage brokers settled 55.7 per cent of all residential mortgages during the September 2017 quarter, which is up from 53.6 per cent in the same quarter last year.
While upcoming changes to mortgage broker commission structures will result in lower lending volumes, brokers will still maintain significant share and their overall footprint will likely continue to increase.
Originally published as Your home loan cheat sheet