Interest Rates, NSW Stamp Duty Changes and other Government Initiatives

INTEREST RATES

Interest rates are predicted to peak lower and pause earlier than originally expected. A cash rate of around 3.6 per cent is where most expectations are now sitting. Some industry experts predict we will only get to 3.1% which would mean only 1 more interest rate rise. CBA’s economist Gareth Aird agrees with this.

Other experts believe in 2023, we will see another rate rise or maybe two, which would get our cash rate to around 3.4-3.6 per cent. NAB’s senior economists believe the cash rate will get to this 3.6 per cent mark by March 2023, meaning we will have 3 more rate rises of 25 basis points

Most economists who were published in the media this week confirmed that a .25 per cent increase by the RBA in December was very likely. This will be the eighth straight increase since interest rates started rising from .1 percent in May 2022, to what is likely to bring the cash rate to 3.1 per cent.

STAMP DUTY CHANGES

From 16 January first home buyers can now opt to pay an annual property tax instead of upfront stamp duty, as the NSW Government legislated the First Home Buyer Choice scheme this week. This may or may not be the best thing though and it really comes down to your personal situation, goals and your strategy.

First home buyers will have a choice

(a) paying the usual amount of stamp duty based on the ‘dutiable value’ of your property – the normal amount of stamp duty

or

(b) paying an annual property tax based on the unimproved land value of the property. The annual property tax payments will be based on the land value of the purchased property. The property tax rates for 2022-23 will be:

$400 plus 0.3 per cent of land value for properties whose owners live in them

$1,500 plus 1.1 per cent of land value for investment properties.

Note, existing first home buyer duty exemptions for the state, and concessions, are not changing. Existing stamp duty concessions for first home buyers are available for purchases of up to $800k, and these concessions will continue. The property tax option will be available for properties for up to $1.5 million.

OTHER GOVERNMENT INITIATIVES

1.     FIRST HOME GUARANTEE (FHBG)

From 1 July 2022, the former First Home Loan Deposit Scheme (FHLDS) has been rebranded to First Home Guarantee Scheme for Eligible First Home Buyers (FHBG)

This scheme is designed to provide a guarantee for eligible first home buyers on low and middle incomes so that they can purchase their first home with only a 5% deposit. The Australian Government is basically being the guarantor, providing the bank with additional security, and enabling the first homeowner, to avoid paying mortgage insurance.

This means you can buy your first home with only a 5% deposit and avoid paying LMI

2.     FAMILY HOME GUARANTEE – FOR ELIGIBLE SINGLE PARENTS (FHG)

This initiative is designed to support single parents with at least one dependent child, to purchase a family home. On 1 July 2022, the Australian Government made 5,000 Family Home Guarantee spots available, through a panel of participating lenders.

The Family Home Guarantee, for eligible single parents on low and middle income, allows a purchase to be made with as little as a 2% deposit, regardless of whether the single parent has bought a home before or is a first home buyer. So, the single parent can have owned a home before.

This means you can buy your first home with only a 2% deposit and avoid paying LMI

3.     REGIONAL FIRST HOME BUYER GUARANTEE (RFHBG)

This is the third initiative from the Federal government, starting 1 October 2022, helping first home buyers living in regional Australia to achieve their dreams of home ownership sooner.

Exactly as the first initiative above, with a deposit as little as 5% of the property value, eligible purchasers can buy or build a property in a regional area without paying mortgage insurance.

You can only be eligible for one of the Federal Government Guarantees:

If an applicant was/were eligible for the RFHBG or FHG, and a FHBG was already issued, this will impact the validity of the FHBG so it’s imperative that you know which Guarantee you’re eligible for.

From 1 October 2022, evidence will be required to demonstrate which you’re eligible for and your broker will need to make clear to the lender and ensure that the appropriate checks have been conducted to ensure all is being acted upon, in line with government expectations.

However, you can combine the Home Guarantee Scheme, which is a Federal Initiative, with the First Home Owner Grants that is offered by a State.

If you are interested in any of these schemes, give us a call and we will see if you meet other eligibility criteria.