The Current Financial Position – Post-Lockdown Update

What Is Going On In The Financial World

It is no surprise to learn that April was one of the lowest months on record for mortgage lending. Obstructed by social distancing and no open homes, the real estate market definitely took a dive over lockdown.

Coupled with many opting to take on deferred payments or interest-only options on their existing mortgages, banks were thrust into a stage of treading water.

The Reserve Bank notes, “housing market activity only resumed a few weeks ago as the nation entered level two lockdown. The sharp fall underlines the huge damage caused by Covid-19, with activity unlikely to reach pre-lockdown levels for several months.” [source]

With the housing market on the go-slow and unemployment rates set to rise, many economists are predicting another cut in the OCR before the end of the year. This could provide some level of relief as mortgage rates are likely to drop with the OCR. But on the flip side, it is not good news for savers as those interest rates will drop too.

We have already seen inklings of this with all of the major banks dropping a number of their fixed-term rates below 2.7%, plus term deposit rates have plummeted.

What Does It Mean For You?

What it means will depend on your current financial situation. If you have found yourself without employment or on reduced earnings, there are a number of options available.

The government has announced an extension of the wage subsidy scheme for certain qualifying businesses and also support payments for those that have lost their job due to COVID-19.

It is also still possible to explore the idea of deferred mortgage payments or converting your loan to an interest-only payment for a short while. This will be a short term solution, however, you need to consider the fact that your loan will be restructured as a result. It is helpful to discuss this with a financial adviser before making a decision.

“By shifting loan repayments to future dates, payment deferrals ultimately increase households’ debt-servicing burden over the remaining term of their borrowing,” the Reserve Bank’s stability report stated. “If current pay reductions and elevated unemployment persist for a longer period than expected, households and banks may find that more substantial loan restructuring or remediation is necessary when deferral periods end.” [source]

If you are considering entering the housing market at this time, you need to be sure of your financial position. If you are still in a strong position, then now could be the time to buy. Mortgage rates are low and the banks have reduced their LVR restrictions. However, you need to be certain you can service the mortgage now and into the future.

Why You Should Take Financial Advice Right Now

In these confusing times, it can be hard to know what is the best option for your family. There are many different scenarios coming into play and it can be confusing to think about what applies to you and what doesn’t.

That is why it is important to consult with a financial expert like the team here at Mortgage Suite. We can look at all the contributing factors from an impartial position. That means we can take all of your personal circumstances into account and look at them from a logical perspective.

We also have the knowledge of what is currently available on the market, so we can run the numbers on several different possibilities. That way, you have all the information you need to make an informed decision.

More important than all of that, we are here to answer any questions you might have, dispel your fears and help you make a decision that you are comfortable with.

So, if you need some help deciding which is the best path forward in the current market, then get in touch with us today.