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Rudd tells home buyers to stand on their own feet
Jack Han investigates the impact of the economic turnaround on Australians with a home loan.
December 1, 2009
When it comes to home loans, the Australian government isn’t prepared to hold consumers’ hands anymore, and home buyers are expected to rely on their own decisions, according to Prime Minister Kevin Rudd.
Following a period of relaxed fiscal and monetary policy which included a maximum First Home Owners Grant of $21,000 and a cash rate as low as 3 percent, Australians are experiencing the normalising effects of a restabilising economy.
As of 2010, the First Home Owners Boost will end (though the $7,000 Grant will continue) and economists are predicting the cash rate to rise above 4 percent in the early months. For a $300,000 25-year home loan at 6 percent p.a. a 1 percent increase will mean that households will pay an extra $187 a month.
With home buyers expressing their concerns about the current shift in policy, Prime Minister Rudd has responded by urging buyers to reassess their long-term affordability, as well as their bank balances.
“At the end of the day, individual home buyers still have to make their own decisions,” said Mr Rudd.
To prepare themselves for the changing economic tides, home buyers are returning to traditional methods, such as shopping around for home loans to slash thousands from their repayments.
Rate rises are an excellent time for institutions to compete for new customers, which means that even though interest rates are predicted to increase over the next two years, there will still be up to a 1-1.5 percent disparity between what lenders offer. This allows potential home owners borrowing $300,000 to save over $85,000 over the life of a 25-year loan.
However, the reality is that housing is becoming less affordable, with the HIA Housing Affordability Index dropping 3.3 percent in the September 2009 quarter compared to the June quarter.
Despite the gloomy outlook, home owners who will survive the fiscal turnaround know that they’re borrowing for the long run and have allowed for a 2 percent buffer in their budgets.
The strong message that the government is sending to home buyers is that we can only continue by standing on our own feet, if we’re serious about owning a home. But this doesn’t mean that you’re all on your own. Australians persist to compare competitive home loans online, and more and more are relying on their own decisions to realise the home ownership dream.
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This article is over two years old, last updated on December 1, 2009. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent home loans articles.
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