“Subdued” rental growth on the cards if international borders not open by 2021: RBA

“Subdued” rental growth on the cards if international borders not open by 2021: RBA

Inner-city housing rents are tipped to show “subdued” growth in the years ahead if the reopening of international borders is delayed beyond 2021, according to the Reserve Bank of Australia (RBA).

Rents in inner Melbourne and Sydney have seen the biggest falls. Melbourne CBD rents plunged by 13 per cent in the three months to July, while in Sydney’s eastern suburbs, Manly and Leichhardt areas, rents tumbled by more than 10 per cent, an RBA report found.

“These areas were more adversely affected by declining demand from fewer international students and the conversion of short-term accommodation to the long-term rental market,” the report noted.

Falling demand and increased supply in some areas

Demand for rental properties have dropped due to a weak job market, as families cut back on spending and request rent reductions or deferrals, according to the RBA.

In general, those who are more likely to live pay cheque to pay cheque tend to be:

  • younger,
  • more likely to work in industries that saw the most initial job losses, including hospitality and arts & recreation, and
  • twice as likely to rent.

“In the near term, renters with limited savings and who are experiencing job insecurity are likely to reduce their spending on housing,” the report noted.

On top of this, a significant part of the rental market has almost evaporated, with international student and migrant numbers nosediving due to the closure of international borders. 

And as international and domestic tourism dwindle, many short-term accommodation providers have listed their properties on the long-term rental market, which is seeing supply levels shoot up. About 40,000 short-term rental listings were axed from Airbnb between February and May, a plunge of about 20 per cent, according to AirDNA data cited by RBA.

Additionally, new property developments which are set to be completed in the next year or two are anticipated to increase the long-term rental stock.

“A large share of these are high-rise apartments that commenced construction a number of years ago when conditions in the established housing market were much stronger,” the report wrote.

However, the RBA noted that this increase in supply has not been the same across all locations and housing types, and is likely to be sharper with apartments in the inner areas of Melbourne and Sydney.

When will the rental market recover?

The central bank predicts that rents in inner-city areas “will remain lower than expected pre-pandemic”, thanks to lower population growth and apartments in the pipeline being delivered in inner Sydney and Melbourne.

By 2021, the national vacancy rate could nudge up by about 1 percentage point, the RBA predicted, before an adjustment in supply and reopening of international borders brings demand back up.

Australia’s population is forecast to see a 1.5 per cent drop by June 2021, or 400,000 fewer residents, from what was projected before the pandemic, according to Treasury figures cited in the report. This decline in population growth is expected to push rents down by about 3 per cent nationally from pre-pandemic expectations over the next few years.

However, depending on how well COVID-19 is controlled, demand for rental properties and rents may bounce back next year.

“The eventual reopening of the borders to international migration will lift demand for rental properties while reduced construction activity will translate into lower-than-otherwise growth in the supply of new dwellings,” the report wrote.

If the coronavirus is controlled and international borders reopen next year, rental demand in inner Sydney and Melbourne could rise, which would prop up rental values.

And with about one in 10 investors pausing their mortgage repayments due to the impact of COVID-19, which is slightly less than the proportion seen with owner-occupiers, it seems “most investors do not appear stretched” despite the fall in rents, the RBA suggested.

Government measures have helped cushion the blow for the rental market: RBA

Along with Jobkeeper and Jobseeker, the temporary ban on evictions for tenants financially impacted by COVID-19 has “helped offset the acute fall in rental demand and stabilise the rental market”, according to the report.

While there was a noticeable drop in online searches for rental properties in late March, government measures and advertised rent cuts helped bring interest and bond lodgements back up from April.

“This suggests that a tenant-favourable market is enabling renters with the capacity to do so to move into properties with lower rents or better amenities,” the report wrote.

For existing leases, the moratorium on evictions and the requirement for landlords and tenants to negotiate in “good faith” supported the rental market through rent payment relief, including discounts and deferrals.

Nearly 15 per cent of existing tenants have accessed some form of rent relief since the end of March, according to data from property management platform MRI, cited by the RBA.

“Discounting and deferral activity increased sharply in the last week of March – coinciding with the announcement of the six-month moratorium on evictions – and peaked in April,” the report wrote, adding that the rate of new discounts and deferrals has slowed since May.

The RBA also pointed out that government policies have prodded tenants and landlords to consider their existing lease terms and potentially renegotiate.

While the ban on evictions is set to end in Queensland on September 30, Victoria, which has been heavily affected by recent COVID-19 lockdowns, is seeking to extend the moratorium and freeze on rent increased until March 28.

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Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

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Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How to break up with your mortgage broker

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off  breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you. 

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation. 

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Do mortgage brokers need a consumer credit license?

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand. 

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.