Jack Han reports on the year that was 2009 for the home loan market and what lessons we have learned.
January 18, 2010
2009 was a big year for home loans, with hundreds of lessons to be learned for home buyers. Going into the New Year, home buyers will hate to repeat past mistakes. So what have we learned from 2009?
Institutions tightened lending criteria amidst interest rate drops. Borrowers learned the importance of keeping a healthy credit and savings history under all conditions, so that they have the best chance of securing a loan when they need it most.
Employment outlook worsened, as redundancies swept the market. Home owners turned to hardship provisions, and learned ways to renegotiate the terms of their debt in struggling times.
The Reserve Bank reduced the cash rate to another historical low, at just 3 percent. Those who fixed their home loans beforehand regret not waiting for another rate cut.
Home repossessions flood many parts of Australia, as borrowers fall behind on repayments. Home owners protected themselves by making extra payments towards their loan, and considered alternative products such as interest-only loans to reduce their repayments.
Australians discover that they are paying up to $1800 a year extra on overpriced mortgages. Borrowers are reminded of the importance of regularly comparing home loan interest rates, to avoid ending up with unreasonable repayments.
Economists predicted that we have reached the interest rate floor and consumer sentiment returned to the economy.
Interest rate fears were met with new, innovative products such as capped home loans, which compete with fixed rate home loans. The lesson is that during times of uncertainty, treat flashy products with caution, because they often come with a catch.
First home buyers rush in before the reduction of the First Home Owners Boost, but are set to suffer rising rates and repayments. This teaches future borrowers to never hurry into long-term debt because of small incentives, and to always stick to realistic budgets.
First home buyers began to leave the market as investors rushed back in. The proportion of home owners who own their properties outright are revealed to have dramatically decreased.
It is clear that 2009 provided us with many examples of triumphs and mistakes that we are sure to see in 2010. Remember these lessons as you shop around online for some of the best home loans today, and you can escape the errors of the past.