Read about home loan news in Australia for June 2021.
This is an edited version of the regular YouTube update which you can watch here.
Welcome to the June 2021 update.
Sharing with you a few things that we’ve noticed over the last couple of weeks in the world of home loans, which I hope will be interesting, and keep you updated.
Today I cover:
- House price up 12% across Brisbane and Gold Coast
- Tactics I used to have my offer to buy a home accepted in a competitive market (March 2021)
- Fixed interest rates are back on the rise – should you fix yours?
House prices up 12% across Brisbane and Gold Coast
So the first thing is is house prices.
There’s a lot of this in the media already but latest Core Logic data shows an 11.9% increase in house prices over the last 12 months in Brisbane and Gold Coast.
And so this is basically, you know, an average 1% a month.
There’s a lot more buyers and there are homes for sale, and so you’re still seeing those really big queues at open for inspections on the weekends.
I spoke in our video from March 2021, with a lot more depth on the factors of why that’s happening.
And those factors are still relevant today.
From what I can tell talking to clients who are preparing to buy at the moment, it seems like this demand is going to continue for the rest of this year and towards Christmas.
So if you’re looking to buy at home, we’re finding that for our clients, it’s a very very tricky time, and it will be for some time to come.
It is important then, to learn about both prices in the markets you are looking and also to know become educated on making offers or going to auctions.
Tactics I used to have my offer to buy a home accepted in a competitive market (March 2021)
Recently, Amanda and I, and the kids bought a home, which was really exciting, and we found that the the market was very very different to what it was previously when I bought a house.
Previously I would make a low offer to buy the home with the Agent and then it would be a matter of negotiating back and forth with the seller, and coming to sort of a middle ground.
It’s a bit like ..the vendor’s wants A and we are at B and back and forth till we reach an agreed price.
Now, at the moment, my experience is that this doesn’t work at all in today’s market.
What we found when we went to open for inspections generally, is that there were a lot of people there, often even lined up down the street.
This is especially the case for the first open home.
For the home we eventually purchased, this was also the case.
There were heaps of people hanging around, coming to multiple inspections and clearly gearing up to make an offer (if they hadn’t already).
A few things we did to help have our offer accepted by the vendor.
We built rapport or a relationship with the real estate agent as much as we could, in as genuine a way as we could (on a side note, another serious buyer was being a little rude I felt to the agent, which was not to his advantage).
We went along to most of the open homes so the Agent got to know us, and knew we were serious about the property.
Both myself and Amanda had a bit of a chat with the agent each time.
The kids were both there running around and opening / closing gates and causing us much grief 🙂 but the point was wanted to show the Agent we were a young family as some Vendor’s like the idea of that. I have seen that work for other people as well so thought I would try that.
The house was originally for auction, so we checked if the vendor would accept offers before the auction – and yes she was – and there were already several offers on the table within days of the first open home.
It’s a good idea to call the agent after the first inspection, actually on the day, if you are keen on the property, as some properties we saw sold on the first weekend.
With the house we purchased, it was owned by a mature, single lady and we could tell the open home experience was stressful for her so we knew she would want to accept an offer fairly quickly to avoid the high stress of an auction.
Also, we knew she was moving inter state and needed the proceeds of the sale of the house to purchase another home.
At the same time, some flexibility with the date she needed to be out of her home to give her time to pack and clean, was important too as a negotiating factor.
Crafting our first offer to buy our family home
Armed with all this information, we were able to perfect our offer.
Our first offer was strategically low on purpose, to set the expectation that we were interested but didn’t think it was worth what the vendor wanted.
At the same time I had already told her out budget was $x and no more.
Certainly we had kept an eye on the market for 18 months so we knew what properties were worth (albeit right now there is no point comparing to prices from 6 months ago).
For the terms of the offer, we made it:
- ‘Conditional on finance’, which was 14 days
- Conditional on an acceptable building and pest
- Settlement was 30 days from the day of the contract.
Feedback on the first offer from the Agent
After a few days the agent got back to us, and said, as expected, please make your final offer.
It’s hard to get any information out of the agent as to how much higher you need to go or how you need to change your conditions.
We did discuss that it would be helpful to go unconditional on our finance – which is a big no no – even for me as a mortgage broker.
You just never know when a bank may turn around and say no you can’t borrow that much.
By making your offer conditional on finance it means you can pull out of the contract if your loan is not approved.
We did however stress that we were very confident we would be approved, so being a mortgage broker in this instance was actually helpful (by the way, what I can do in the situation where you are making final offers is talk to the agent on your behalf to give them confidence your home loan will be approved).
Our final offer
We knew we were up against cash unconditional buyers who are very appealing to the vendor as its simple and certain (they pay in cash so there is no risk of the deal falling over at the last minute because finance was declined).
We also knew that if our finance was not approved by 5pm on the finance date, we would not get the home (extensions were not an option) so we really made sure it would be approved (as I do for all my clients).
For our final offer we jumped the price up to the maximum we felt comfortable paying – which was the top end of the budget I had told the agent in the first place.
At the end of the day we wanted to feel that it we did loose out, we had offered at the top of our budget.
There is nothing worse than finding out the offer that was accepted was only a bit higher than yours and that you could have stretched there.
We left the other terms as was as we knew they were what appealed to the vendor.
Why our offer was accepted
We will never know what the other offers were, but I suspect there may have been higher offers than ours.
Because we offered a quick settlement and a reasonably quick finance period with the added benefit of giving the vendor certainty that it would be approved (as I’m a mortgage broker), it really helped in making our offer more appealing.
The vendor wanted to deal with a buyer who would be flexible in regards to leaving some of her items on the property for a while, and given we had built a relationship with the Agent, I think the agent knew we would be understanding and flexible with the vendor’s needs.
The agent did come back to us saying the Vendor wanted more, but I said ” I told you at the start it was my best and final offer” (remember when I told the agent upfront what our budget was).
There is no doubt that it was an extremely stressful situation, even for me, having the knowledge of what was happening with our finance.
You have to stay calm throughout the process.
Make sure you communicate what is happening to the Agent as it gives the agent confidence in you as the buyer.
Fixed home loan interest rates are back on the rise – should you fix?
So one interesting thing that sort of started to change over the last couple of weeks, is that I’ve noticed that some of the banks with their three, four and five year fixed rates, you’re now seeing that move up a little bit.
And this is based upon the fact that the expectation is that rates may rise in three to four years.
Three to four years from now, is obviously 2025 / 2026.
It’s a long, long time away and no one knows what might happen in that time.
But it’s still interesting to see that this is an indicator, and it’s starting to happen now.
Some fixed rates were below the 2%’s – 1.8% or 1.9%.
Now you’re seeing them nudge in early 2%’s – so 2.1% to 2.3%.
Predicting a few years out, it’s very difficult to do, it’s all conjecture, but it’s interesting to see this happening, and good to be aware of it.
Banks know much more than what we ever do about where rates are headed.
It’s impossible, in my opinion, to get it right, it’s very very difficult to beat them at their own game – what I am saying is don’t fix if you think you will beat the banks at their own game.
But you need to do what is right for you.
So if you’re very comfortable with where you’re living, and the loan repayments that you’re doing, you might fix because you go, I like the fact that this gives me certainty for the next 2,3,4 years.
You might lock that in, because then it gives you a set obligation each month or a set payment.
Now, if you’re going to do that though it’s important remember.. never, never, in my opinion to fix 100% of your home loan.
And the reason why that is, is because in my opinion, you always want the flexibility of having some variable rate, because you can pay that extra repayments off that to help you pay it down sooner.
So what you will notice with fixed loans is if you pay extra into the loan, usually above a certain amount, you can be charged penalties.
Whereas, if you keep a portion of your home loan variable, you can put as much into that as you want which reduces the interest rate, pay the loan down sooner, and you can still have access to that money if you need it in an emergency.
My situation financially is we’re staying variable.
At the moment the property that we bought is needs a lot of renovation.
We ended up borrowing more than what I had wanted to initially and so what I’ve got is a goal over the next couple of years to really increase the repayments into that loan, and to pay it down sooner. We need to be variable to achieve this.
But I also recognize that, you know for some people in their situations, fixing can give them good peace of mind can be a good.
The process to fix your home loan.
It is not as complicated as applying for finance, some people are a bit scared away by the whole process.
Some banks have a very quick, fixing process. So you can literally do it within a few minutes, online.
And then other banks, it can take a few weeks or more depending upon their process.
So, we can help with any of that at all, let us know.
And thank you very much for watching.