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Housing affordability getting worse

Housing affordability getting worse

Two in five Australians believe housing affordability is an issue, according to new research from the University of Sydney.

The university’s “What Matters” campaign asked Australians to vote on the topics of importance to them via interactive displays erected in several Sydney CBD locations.

Of more than 16,000 votes, the hottest topics included solving climate change for future generations, reducing our environmental footprint, preventing human rights abuses and housing affordability, with 43 percent of Australians polled believing housing affordability matters.

Associate Professor Nicole Gurran at The University of Sydney’s Faculty of Architecture, design and planning conducts research to look at ways to close the gap between the cost of housing and the price people can afford.

“Cities in Australia, just like cities in many other parts of the world are really struggling with the issue of housing affordability,” she said in a statement.

“For a long time in Australia our housing industry delivered housing very efficiently; the right amount of housing keeping up with population growth and housing need, and relatively in the right location – places where people wanted to bring up their families.”

However, over time there has become an increasing gap between the price at which the industry is able to deliver housing and the price at which we can afford, she said.

“Supply and demand is an issue – there is a limited supply of housing in well located areas close to transport, employment, or amenities, against growing demand as our population grows and new households form.”

Another demand factor has been differing capacities to pay high house prices, she added.

“The past decade saw a combination of factors – we now have more dual income households with higher purchasing power, and we also saw interest rates drop dramatically – meaning people could borrow a lot more than in the past,” she said

“As housing equity grew, those already in the housing market also had much higher purchasing power, so price growth was able to outstrip income growth in a way that we’ve not seen before and might not see in the future.”

The findings are in line with recent RateCity research, which found that it would take the average first home buyer more than five years to save a 10 percent deposit, which falls short of the recommended 20 percent down payment.

Michelle Hutchison, spokeswoman for RateCity, said the study shows that affordable housing is still out of reach for many Australians.

“Despite lower interest rates and falling property values, buying a home is still a distant dream for many Australians and the reality is that some will never afford to buy in their desired areas,” she said.

“Saving for a deposit of 10 percent is basically the bare minimum of what you need to buy a home. While it is possible to borrower up to 98 percent of a home’s value, it makes greater financial sense to save for longer before applying for a home loan.”

That’s because other expenses, such as upfront home loan fees which average $700, lenders mortgage insurance and stamp duty can run into the thousands of dollars, she said.

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Learn more about home loans

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.