The Budget and inflation have been dominating the headlines recently. Here are four other stories that are important to know with May coming to an end:
- Variable loans surge in popularity
- Housing scheme milestone
- ATO warns investors
- Building costs explained
Back in March 2020, at the start of the pandemic, 13.38% of new borrowers were choosing fixed-rate loans and 86.62% were choosing variable. But in March 2024, a staggering low of only 1.40% of new loans were fixed, compared to 98.60% variable, according to the Australian Bureau of Statistics.
The reason so many borrowers are going variable right now is because of a widespread belief that interest rates are at or near their peak, which means variable borrowers would benefit from any future rate cuts. Conversely, in July 2021, when interest rates were at record-low levels, 46.02% loans were fixed, while only 53.98% were variable.
If you’re wondering whether fixed or variable is right for you, here are the main pros and cons of each option:
Are you a first home buyer or single parent who wants help getting a property? If so, you’ll be interested to learn that the federal government’s Home Guarantee Scheme (HGS) has now supported more than 150,000 buyers since its inception in January 2020.
Eligibility is limited. There are property price caps, which vary from state to state. Income caps also apply – $125,000 for individuals and a combined $200,000 for joint applicants.
The HGS consists of three programs:
- First Home Guarantee
Eligible first home buyers can purchase a property with just a 5% deposit, without having to pay lender’s mortgage insurance (LMI). There are 35,000 places available this financial
- Guarantee Regional First Home Buyer Guarantee
The same as above, but for regional first home buyers only, with 10,000 places this financial year.
- Family Home Guarantee
Eligible single parents and single legal guardians can purchase a property with just a 2% deposit without paying LMI. There are 5,000 places this financial year.
Of the 150,000 buyers who have used the HGS, 51% have been women and 55% have been under the age of 30, according to Housing Australia, which administers the scheme.
The Australian Taxation Office (ATO) has warned property investors it will pay close attention to their reported income and deductions this tax time, with official data showing that about 90% of investors get their tax returns wrong.
ATO assistant commissioner Rob Thomson said general repairs and maintenance on your rental property can be claimed as an immediate deduction – but expenses that are capital in nature (like immediate repairs on a property you just bought or improvements some time after purchase) are not deductible as repairs or maintenance.
“We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this. This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,” he said.
“You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window. But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works.”
Here are three things to consider if you’re thinking about building a home in 2024:
- Calculate your borrowing capacity. This can vary significantly from lender to lender, especially as some lenders are more builder-friendly than others.
- Do your homework when searching for a builder – ask friends for recommendations, check online reviews and ask builders for the contact details of their most recent clients.
- Be conservative with your planning – projects often run overtime and over budget.
Hope you enjoyed our latest mortgage updates. In case you need any assistance with your home loan or refinancing, feel free to contact us. Subscribe to our newsletter for regular updates.
