The Reserve Bank has cut rates to low levels to encourage borrowing.
This is a good thing.
The strategy has worked.
Housing and construction are the backbone of our economy – because they generate so much employment and activity.
House price has increased – and that in itself is not a bad thing.
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Bill Evans took up the Chief Economist role at Westpac in 1991 and has consistently been “getting the big calls right for 30 years”.
When he talks – I listen.
Bill Evans predicts (The Australian Sat 11th Sep 2021) “Interest rates will rise… starting in the first quarter 2023… and going up (in steps) by (only) 1.25%”.
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If you’ve saved for a rainy day… It’s raining.
These are the guidelines you should follow for your home loan or your investment loan – if you find yourself in difficulty.
Depending on the level of difficulty you face, these are the steps you should follow… in order;
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Over the last week I have had several clients ask me what I both think and suggest in the current circumstances.
I have been quiet since my email of 6th Feb when I highlighted what the Corona Virus outbreak might mean for the year ahead.
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We had an election where one of the choices we had to make, in relation to housing, allowed one generation in the population to benefit only at the expense of others.
What we chose instead though is to the benefit of every generation – yes that is possible.
First Home Buyers are the BIGGEST winners.
The cash deposit required has been the largest hurdle for them to overcome. Until now First Home Buyers have needed to find 5% of purchase price PLUS costs to get those keys to the front door. Mortgage Insurance (of around 3.5%) was the biggest cost. On a $500k purchase – this meant they had to find $42,500.
Most people misunderstand badly the term “buyers’ market” and hence never take advantage of one.
A buyers’ market is one where no-one is buying.
Consequently, it is a terrible time to sell.
In a buyers’ market there are more sellers than buyers, buyers can take their time, negotiate price and/or conditions to suit themselves and if a seller doesn’t “meet” their demands then the buyer moves on to a seller who will.
Who wouldn’t want house price to go down? – I’ll tell you who – that would be EVERY person who owns a house.
One side of politics at the moment sets the country against itself – the politics supposedly of the “haves” and the “have-nots”. What a sad way to view life and aspiration.
Here is a truth – EVERY person who buys a house (be it their first or their tenth) wants house price to be down when they buy.
Read moreFollowing the most recent Reserve Bank meeting earlier this month, it is being widely interpreted that the official cash rate is likely to stay on hold until late 2019 (Bill Evans, Westpac Chief Economist. There are now even interpretations of rates on hold until late 2020. ClickHere
The factors in play: the exuberance of regulators (APRA / ASIC) have done all of the Reserve Bank’s heavy lifting. The Royal Commission is causing banks to pull back even further. The Treasurer now mentions an “unintended” credit tightening.