The mortgage market is shifting rapidly at the moment with more lenders (albeit smaller, more expensive lenders) cutting rates as inflation eases. Seven banks have preemptively reduced both fixed and variable home loan rates this week in anticipation of a likely RBA cut on Tuesday, fuelling competition and hopefully contributing to borrower optimism.
Australian lending rates have now dipped to their lowest level in two years.
Having said that, ANZ’s digital arm, ANZ Plus, surprised the market by raising its variable rate by 0.16 percentage points this week – go figure.
Let’s see what Tuesday’s RBA announcement brings – surely another cut is more than warranted this time around.
In this week’s newsletter, we take a look at how a friend can be helpful when buying a home.
In a challenging property market, first home buyers are increasingly exploring alternative pathways to gain a foothold. One such approach, partnering with a trusted friend, can offer strategic advantages, both in terms of borrowing capacity and eligibility for government assistance.
Joint applications between friends are becoming more common and when structured correctly, this arrangement can significantly increase borrowing power, allowing both parties to access properties that may otherwise be out of reach. If both applicants meet the relevant criteria, they may also be eligible for First Home Buyer grants and stamp duty concessions, further reducing the financial burden of entry into the market.
Of course, this strategy requires careful planning. Legal advice and formal agreements are essential to define responsibilities, ownership shares, exit strategies, and financial obligations. A well-structured co-ownership agreement can mitigate future disputes and provide a clear framework for managing the asset.
Another lesser-known benefit is the ability to improve serviceability through rental income from a housemate. Some lenders allow borrowers to include rent from a friend or flatmate as part of their income when assessing a loan application. While policies vary by lender, this additional income stream can make a material difference to borrowing capacity, particularly for solo applicants. It’s important to note that this typically applies to borrowers purchasing a home to live in, not investment properties.
These strategies highlight the importance of exploring non-traditional options when entering the property market. With the right legal and financial advice, partnering with a friend, whether through joint purchase or informal rental arrangements, can be a practical and effective way to overcome affordability barriers.
In the current lending environment, a flexible and well-informed approach can make all the difference. Sometimes, the key to home ownership is not just what you earn or save, but who you partner with along the way.
If you’d like us to help any of your clients explore this in more detail, please put them in touch with us.
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.
