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Some interest rate movements during the week with Suncorp announcing significant reductions across its home loan range, with fixed rates for owner-occupiers and investors cut by up to 0.50%, and some interest-only products slashed by as much as 70 basis points. Variable rates for investors have also been reduced, with cuts of up to 0.25%.
Other lenders are following suit. HSBC, Bank Australia, and Heritage Bank have adjusted rates this week, while ANZ and NAB cut advertised variable rates earlier in November. Despite the Reserve Bank of Australia’s (RBA) cash rate holding steady, lenders seem to be inclined to offer more competitive rates to attract borrowers.
The average variable rate for new loans remains at 6.3%, according to RBA data, but with no immediate cash rate change expected, the market is seeing heightened competition.
In this week’s newsletter, we take a look at the potential traps when accessing superannuation for a home deposit.
Superannuation can provide a pathway to homeownership, particularly for first-time buyers. Through the First Home Super Saver Scheme (FHSSS), individuals can voluntarily contribute up to $15,000 per year (and $50,000 in total) into their super, which can later be withdrawn to use as a deposit.
This strategy leverages the favourable tax environment of superannuation to help potential homeowners save faster.
In cases of severe financial hardship, superannuation may also be accessed early, but this is subject to strict eligibility criteria and approval from the Australian Taxation Office (ATO).
However, while accessing superannuation for a home purchase can be helpful, it is not without drawbacks.
The Risks of Accessing Superannuation:
Reduced Retirement Savings: Early withdrawals diminish the funds available for retirement, potentially compromising long-term financial security. Compounding interest, which grows your super over time, is also reduced.
Potential Financial Hardship Label: Withdrawing super under financial hardship conditions could signal instability to lenders, affecting future borrowing capacity.
Limited Funds: Superannuation balances are typically not large enough to fully fund a deposit, meaning buyers may still need additional savings.
Using superannuation for a home requires careful consideration of long-term consequences. For many, keeping super intact to maximize retirement wealth is the better option.
If you have a client who is considering accessing their superannuation to use a deposit, put them in touch with us and we can work with them to ascertain if this is the most appropriate strategy for them.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
