As the gap between rental prices and mortgage repayments narrows, investors and first time buyers have an opportunity, says Mortgage Choice. The broker has pointed to RP Data figures showing expected increases in capital city rents, and predicted more people may be spurred toward home ownership as a result.
While property investors may look forward to greater rental yields for the year ahead, Mortgage Choice spokesperson Kristy Sheppard said renters are facing significant rises.
“RP Data recently reported capital city rents increased by 4.2% in 2010 and commented that they are expected to rise by 7% this year. To put this into real terms, in Sydney it equates to an extra $23.47 on the average weekly rent of $480 for a house and $30.80 on the average weekly rent of $440 for a unit,” she said.
With these rises, Sheppard said, the gap between renting and servicing a mortgage is quickly closing. She pointed out that even with an expected RBA rate hike in the latter half of the year, repayments on average mortgages are still close to average capital city rent.
“It looks likely we’ll see interest rate rises of around 0.5% by the end of 2011. For a 30-year $300,000 principal and interest home loan at 7% – by no means the lowest rate available – this means $31.30 extra on the required weekly repayment of $460.29,” she commented.
Sheppard said rising rents were the second most common motivation for first time home buyers in the company’s 2011 Future First Homebuyer Survey. According to Sheppard, easing lending criteria can help brokers move renters into the property market.
“When it comes to home loan approval criteria these days, some lenders now consider rental history as genuine savings. A number have increased the amount they will lend to 95% of the purchase price and several are dropping their fixed rates, which is good news for borrowers who need the peace of mind that comes with locking in a guaranteed steady repayment level,” she commented.
As the gap between rental prices and mortgage repayments narrows, investors and first time buyers have an opportunity, says Mortgage Choice. The broker has pointed to RP Data figures showing expected increases in capital city rents, and predicted more people may be spurred toward home ownership as a result.
While property investors may look forward to greater rental yields for the year ahead, Mortgage Choice spokesperson Kristy Sheppard said renters are facing significant rises.
“RP Data recently reported capital city rents increased by 4.2% in 2010 and commented that they are expected to rise by 7% this year. To put this into real terms, in Sydney it equates to an extra $23.47 on the average weekly rent of $480 for a house and $30.80 on the average weekly rent of $440 for a unit,” she said.
With these rises, Sheppard said, the gap between renting and servicing a mortgage is quickly closing. She pointed out that even with an expected RBA rate hike in the latter half of the year, repayments on average mortgages are still close to average capital city rent.
“It looks likely we’ll see interest rate rises of around 0.5% by the end of 2011. For a 30-year $300,000 principal and interest home loan at 7% – by no means the lowest rate available – this means $31.30 extra on the required weekly repayment of $460.29,” she commented.
Sheppard said rising rents were the second most common motivation for first time home buyers in the company’s 2011 Future First Homebuyer Survey. According to Sheppard, easing lending criteria can help brokers move renters into the property market.
“When it comes to home loan approval criteria these days, some lenders now consider rental history as genuine savings. A number have increased the amount they will lend to 95% of the purchase price and several are dropping their fixed rates, which is good news for borrowers who need the peace of mind that comes with locking in a guaranteed steady repayment level,” she commented.As the gap between rental prices and mortgage repayments narrows, investors and first time buyers have an opportunity, says Mortgage Choice. The broker has pointed to RP Data figures showing expected increases in capital city rents, and predicted more people may be spurred toward home ownership as a result.
While property investors may look forward to greater rental yields for the year ahead, Mortgage Choice spokesperson Kristy Sheppard said renters are facing significant rises.
“RP Data recently reported capital city rents increased by 4.2% in 2010 and commented that they are expected to rise by 7% this year. To put this into real terms, in Sydney it equates to an extra $23.47 on the average weekly rent of $480 for a house and $30.80 on the average weekly rent of $440 for a unit,” she said.
With these rises, Sheppard said, the gap between renting and servicing a mortgage is quickly closing. She pointed out that even with an expected RBA rate hike in the latter half of the year, repayments on average mortgages are still close to average capital city rent.
“It looks likely we’ll see interest rate rises of around 0.5% by the end of 2011. For a 30-year $300,000 principal and interest home loan at 7% – by no means the lowest rate available – this means $31.30 extra on the required weekly repayment of $460.29,” she commented.
Sheppard said rising rents were the second most common motivation for first time home buyers in the company’s 2011 Future First Homebuyer Survey. According to Sheppard, easing lending criteria can help brokers move renters into the property market.
“When it comes to home loan approval criteria these days, some lenders now consider rental history as genuine savings. A number have increased the amount they will lend to 95% of the purchase price and several are dropping their fixed rates, which is good news for borrowers who need the peace of mind that comes with locking in a guaranteed steady repayment level,” she commented.
(Source: Adam Smith, 22/03/2011 www.brokernews.com.au)
