Lowest interest rates on the market for borrowers

Property might be a national sport, but this Spring, we’ll be playing an entirely different form of the game, the research head of property comparison firm RateCity has warned.

RateCity research director Sally Tindall says every dollar counts this Spring.

Property might be a national sport, but this spring, we’ll be playing an entirely different form of the game.

Twelve months ago, Australia’s property market was rising at the fastest pace on record.

Borrowers were throwing down eye-bulging offers on properties before they even hit the market.

And then the wind changed. Or rather, the cash rate did. Now people applying for home loans are finding they can no longer borrow as much from the bank.

Why? Because higher interest rates mean we now have to pay more to the bank in interest.

Add in the rising cost of living and you can almost hear people’s borrowing capacities crunch.

The good news? When it comes to cash rate hikes, we’re likely to be over the halfway mark.

The bad news is rates could still rise another 1.5 per cent, squeezing budgets – and house prices – even further.

Already property values are down in Sydney, Melbourne, Hobart, Canberra and most recently Brisbane. The others are likely to start dropping within months.

While property prices are set to fall even further, this doesn’t automatically mean it’s a terrible time to buy.

It’s a buyers’ market, so if you do jump in, know you have the upper hand. Use it to your advantage. Play hard ball.

LOWEST VARIABLE RATES:

(August 2022)

Loans.com.au 3.10pc

P & N Bank 3.24pc

G & C Mutual Bank 3.24pc

Gateway Bank 3.24pc

Bank of us 3.29pc

(Source: RateCity.com.au Rates are for owner-occupiers paying principal and interest. LVR requirements may apply).

People hoping to buy and then sell should think carefully about how this might play out. While it can be a great strategy in a red-hot market, flush with hungry buyers, it’s a risky one when both prices and buyers are falling like flies.

If it’s just a matter of logistics, think outside of the box. A short-term rental or an extended holiday might give you the ability to sell first, then buy.

Getting a new loan at a time when rates are on the rise can be challenging. While banks can honour pre-approvals, if you have one, triple check it’s still valid. The last thing you want is for your budget to be slashed mid-sale.

Getting all your ducks in a row is crucial to maximising your borrowing.

If you haven’t yet applied for a loan, get your ducks in a row. Your bank should tell you what your maximum borrowing capacity is, but that shouldn’t be your one and only check. Do the maths yourself, adding in a 3 per cent buffer. Better to be safe than sorry.

While rate rises might be putting a dent in your budget, there are steps you can take to help boost your chance of approval.

Firstly, look for a competitive deal. Not only will you pay less interest each month, but a lower variable rate should mean you can borrow more from the bank.

LOWEST FIXED RATES:

(AUGUST 2022)

1-yr fixed Police Credit Union 3.99pc

2-yr fixed The Capricornian 4.49pc

3-yr fixed Police Bank 4.69pc

4-yr fixed Westpac 4.89pc

5-yr fixed Macquarie Bank 5.39pc

(Source: RateCity.com.au Rates are for owner-occupiers paying principal and interest. LVR requirements may apply)

A cracking rate after the August RBA hike is below 3.5 per cent, however, if you don’t have a big deposit, expect to pay a bit more.

Secondly, if you’ve got a credit card (or two), give them the boot. When the bank crunches the numbers on your application it will assume you’ve maxed out your cards, even if you don’t owe a cent.

Finally, print out a list of expenses and attack them with the red pen. The bank wants to see how much you spend each week, so show them what you’re capable of. Just make sure any savings you make goes into a high-rate account. There are banks now offering savings rates over 3 per cent.

While this won’t set your world on fire, if you’re about to get into the home loan game, every dollar counts.

*Sally Tindall is RateCity’s research director and finance expert.

Originally published as Lowest interest rates on the market for borrowers