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The U.S. Federal Reserve’s decision to lower interest rates this week could have ripple effects on Australian interest rates because when the Fed talks. other countries listen closely.
A lower U.S. rate can lead to a weaker U.S. dollar, which may strengthen the Australian dollar, potentially impacting export competitiveness and economic growth.
Additionally, changes in U.S. rates influence global investor behaviour, with capital flows shifting based on perceived returns. If the RBA sees the U.S. move as a signal of slowing global economic growth, it may feel pressure to lower Australian rates to stimulate domestic growth and maintain competitiveness.
But of course, the RBA’s decision will also depend on local factors like inflation, employment, and economic performance.
In this week’s newsletter, we take a look at how child care fees can impact on borrowing capacity.
Childcare fees, like many living expenses, are increasing in Australia. But how do they affect your borrowing capacity and home loan application?
Here’s a breakdown:
Why Childcare Fees Matter
- Major Expense: Childcare is a significant cost for many Australian families, which lenders factor in when assessing your financial situation.
- Influence on Borrowing Power: Lenders calculate your borrowing capacity based on your income and financial commitments, including childcare fees.
Childcare and Your Financial Commitments
- Dependents Matter: Children are a long-term financial commitment, and lenders account for this when evaluating your mortgage application.
- Other Expenses: Alongside childcare fees, raising children adds costs like healthcare, after-school activities, and household expenses, all of which are reflected in your finances.
Lender Assessments
- Household Expenditure Measure (HEM): Lenders use HEM to gauge living expenses, but it has been criticized for underestimating non-essential costs like private school fees.
- Reporting on Outgoings: Most lenders now ask for detailed reports on household expenditures, ensuring a more accurate assessment of your ability to meet mortgage repayments.
Conclusion
Child care fees, and costs associated with raising children more broadly, directly impact borrowing capacity, as lenders view families with more children as having higher living expenses and less disposable income to commit to a home loan.
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.
