Episode 62 of the FS360 Podcast - How's the market?

Summary of the podcast:

When it comes to buying a home, Mulcahy & Co Finance Broker Evette Turlan says there are three areas that need to be nailed down; your deposit, affordability and your credit score.

Speaking with Luke Pedder on the How’s the Market podcast, Turlan elaborated on what banks look for when you apply for a home loan, fixed interest rates versus variable and the current state of interest rates in Australia.

“Number one, deposit, 5% deposit is all you need to buy and occupy a home. It must be genuinely saved, that’s where we come into it with our expertise and to show you what that genuine savings means from a bank point of view,” said Turlan.

“Number two is your ability to repay that loan plus any existing finance. That can sometimes be a bit of a juggle where we might have to look at consolidating someone’s loans in order toimprove their affordability of the loan.

“Number three is your credit score … you need to look at your credit score. Google Equifax and ask for your free credit score. If you are in the red, we’ve got people that we refer our clients to who can get their credit score back in the orange and the green.”

For those looking to purchase a property, the choice of buying at an auction is one that Turlansaid people should not be afraid of.

Pedder explained that with property ‘days on market’ inching closer to 23 or 24 days compared to 11 or 12 during Covid, auctions could be a path that home owners take when trying to sell.

If it’s a path that potential buyers look at, Turlan said inspecting the house is key, as well as being sure what the deposit type is before auction day.

“Don’t be scared of auctions … you have your pre-approval in place, what you’re going to buy that property for at auction is going to be within your budget,” said Turlan.

“When banks assess home loans, they don’t assess your home loan on what the rates are now, they add a buffer, so you are well within your budget when we give you a pre-approval.”

For home owners currently paying off their loans, Turlan said “it's a really, really unique time in the market”.

She added that if possible within your budget, variable interest rates are the encouraged path to take.

“I’ve never seen them (interest rates) peak the way that they’ve peaked over the last 12 months, so many rate rises in such a short amount of time,” Turlan said.

“Commonwealth Bank have dropped their fixed rates recently, so that’s an indication that the market is coming back around to be a bit more stable.

“If they (banks) drop their one-year rates, that’s where they believe the variable rates are going to be below those rates in 12 months’ time.

“We’re not encouraging clients to lock away any longer than 12 months at the moment and … if you want to go fixed, it’s a budget decision.

“We’re saying that if your budget dictates that you can’t absorb one more rate rise or maybe two more … over the next six months, then you would lock away, besides that, variable all the way.”

For those coming off a fixed rate, their repayments could rise two to three times what they have previously been.

Turlan said rate reviews is a good next step for home owners in that position.

“We offer free rate reviews. If you are coming off a fixed rate and you want us to go in and bat for you to shop at your current lender, you just need to give us a call,” Turlan said.

“If you’re on a variable rate we can do it as well … my personal belief, if your home loan (interest rate) doesn’t start with a six, you’re getting ripped off.

“As we’ve seen in the last few years, as values have gone up, peoples’ home loans are coming down, so what they call the loan to value ratio might have reduced to a point where you’re getting charged interest unnecessarily.”