Australian home owners market outlook September 2016
For all intents and purposes according to a recent Reuters article the Australian economy seems to be growing steadily up 3.3 per cent in the year to June 2016.
The annual growth was ahead of other leading nations including the United States at 1.2%, 1.6% in the European Union, 2.2% in the UK and Germany’s 3.1%.
So why is it that leading economists are still factoring a possible further rate cut by the end of the year? The answer lies in the low inflation figure.
In a recent Fortune article Shane Oliver, chief economist at AMP Capital Investors said, “Inflation has been too low for too long and that could argue for the next rate cut in November,” he added. “But I have to say it’s a close call.”
So why is inflation bad for everyday folks like us?
Well, low inflation in Australia in intrinsically linked to low wage growth.
In fact according to recent data from the Australian Bureau of Statistics Australian workers are enduring historically low wage growth with another flat result being reported for the June 2016 quarter.
In particular, wages in Australia only grew 2.1 per cent, held down by a slowing rate of jobs growth and ongoing underemployment. Interestingly, wages grew 0.4% faster in the public sector when compared to the private sector for the period between June 2015 and June 2016....wages grew 0.4% faster in the public sector when compared to the private sector for the period between June 2015 and June 2016.Click To Tweet
With low wage growth it is argued that people are inclined to spend less. If they spend less, this can cause higher unemployment as businesses look to recover lost revenue with worker layoffs.
This downward economic spiral is what the Reserve Bank wants to avoid and a further lowering of interest rates could provide the stimulation the economy needs.
Combine the above factors with this week’s Core Logic Home Value Index data and you start to see the Australian economy is patchy at best. The data showed a 1.1% rise in dwelling values in August, with six of the eight capital cities recording a lift in dwelling values over the month. This is great news for home owners and property investors.
But, this ‘patchy’ sentiment is reflected in the ANZ-Roy Morgan consumer confidence index with a fall of 2.8% in August, which could mean consumers are more inclined to keep their hands in their pockets instead of spending for the period ahead.
What does it mean if you have a home loan?
According to Geoff Wilson at Urban Money, it means, more than ever, you need to ensure you have a competitive low home loan rate that is tailored to your situation.
“It is important to speak to your lending manager because a small change in your financial situation can have a large impact on your home loan repayments. For example we have been able to move some customers who have been on one type of home loan, which suited their situation in the past, to a different product that better suits their new situation now, because of employment changes and other factors, “Geoff said.
“For example, a saving of 0.5% p.a. off a $300,000 home loan over 30 years can save you $32,544 in interest over the life of the loan. At the very least, it is worth having the conversation of where you want to be, because that way we can tailor your home loan to get you their fast.” Geoff adds.
At Urban Money we are in the process of contacting all our customers to ensure your home loan is performing the best it can for your current situation.
If you want to speed up this process speak to your Lending Manager by filling out the contact form below.
So talk to us today.