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Interest rate rise 4th October 2022
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G’day, everyone. It’s Heath from You&Me Personalised Property Services. Here with Matthew from Capita Finance Solutions. Thanks for joining us.
And we’re here getting chatty with Matthew Stevens.
Australia’s interest rate rise in October 2022
For property owners
We’ll go straight into it. We’ll talk about the elephant in the room: the interest rate rise on the 4th October 2022, when they met.
What does it really mean for property owners?
$500,000 mortgage
So can you just get straight into it? Let us know what happened and what that means in real terms on say a $500,000 mortgage.
So we’re looking at consumers’ pockets specifically. We’re looking at about a $70 increase at the end of each month on a half-million-dollar loan.
Obviously, the cash rate went up 0.25%. So, you’ll be paying an extra $70 per month on your already increased mortgages on a $500,000 mortgage.
Correct.
$1,000,000 mortgage
Now, obviously, on a $1,000,000, we double that to $140 a month.
$1,500,000
And the $1.5 million mortgage, we’re tripling that to $210 extra per month.
Rate increase since April 2022
Rates in April 2022 vs October 2022 and what it means for homeowners
Now let’s get back to April 2022 when we started to see the terrors.
And what does that mean in real terms? What does it increase by and what does that mean in your pocket for a $500,000 mortgage?
From 2.5% to 4.5%
That’s probably where we’re seeing the biggest movement. So you’re going from about 2.5%, right to a near 4.5% rate.
On a $500,000 property
If you were to look at the differences between then and now on your half-million-dollar property, you’re looking at about a $400 per month increase.
That’s crazy! So, when you were paying $500 a month before, you’re now paying $900 or thereabouts, somewhere it may be.
On a $1,000,000 to $1,500,000 property
So again, if we double that for our Eastern staters: Melbourne and Sydney at $1,000,000 or $1.5 million average prices, you’re looking at $800 a month increase and a $1200 a month increase.
It’s quite a huge dramatic increase in such a short time.
How equity can help
But there is, I guess, light at the end of the tunnel when we talk about equity. And, we’ve seen Sydney, Melbourne, Canberra drop pretty sharply over the last couple of months. Now, what can they do, because they did grow in the last two years: $200,000, $300,000, $400,000.
What can property owners do?
And now people are wondering, what can I do, although it’s dropped? We still a major advantage here. How can I take my money out and spend it somewhere else?
Absolutely. So, at Capita Finance Solutions, we’re doing a lot of refinancing, and a lot of accessing equity.
The biggest advantage we have is a large capital raise, as you said. People over east, especially have experienced 20%, 30%, up to 40%-45% growth.
Now you’re talking $1,000,000 at 30%, 40%.
Equity for a $1,000,000 property over east
On a $1,000,000 property, you’ve got $300,000 or $400,000 extra equity that you didn’t have before.
If you already started on an 80% loan-to-value ratio. This means that 80% of the value of your home is borrowed funds, then you’ve got an extra $300,000 to $400,000 to pull out and use to invest elsewhere.
About the Perth’s property market
Perth market hasn’t gone backwards like the rest of the country, excluding Adelaide of course. So, you know, $300,000 to $400,000 equity, pull it out, put it to somewhere where it’s still a rising growing market, and something that is in Perth an average still of $630,000 thereabouts for an average property.
Yes, you’re almost looking at 40%-50% of the property covered and you’ve got very high rental yields as it is:
- high rental yields here in Perth
- high capital growth over East
Do a property valuation
Property valuations are valid for 6 months
What we can do is get free property valuations done. Join it together.
And that’s valid for six months.
Then what you can do is have someone walk through your house from the bank, value it via walks through, and that’s valid for a six month period.
Accessing valuation is retroactive
So if you find a decline in valuation in the value of your home over that six month period over East, you’re able to still access the valuation as of today.
That’s right. Where over here, if prices are impacted, you’re able to then get a cheaper house accessing most or more of equity in your own home.
Highest rental yield in Perth: 4.4%
And we always talk about rental yield (we’ve spoken about it in a previous article), that Perth or WA has the highest rental yield in Australia at 4.4%.
Achieving high rental yields with our buyer’s agent services
But at You&Me Personalised Property Services we’re quite regularly and consistently getting a 5% to 6.5% rental yield with our buyer’s agent services for Perth properties.
And generally, a hotspot is that at $450,000 to $550,000.
In summary
- you pull out equity from Sydney, Melbourne, Canberra,
- put into Perth,
- have a rental yield that’s already paying your mortgage off
- and you’re home and host!
Know more about what we can do for you
So guys, if you want to know anything at all about rental yield, capital growth or pulling your money out of your Eastern States equity and putting into Perth, come and see us, or Matt from Capital Finance Solutions.
Matt Stevens, Capita Finance Solutions
Website: click here
Phone: 0400 974 336
Email: mstevens@capitafinance.com.au
And until next time, as usual, happy investing!