The 2019 tax package
The Federal Government’s new tax package, which became law earlier in July, will see lower and middle-income earners enjoy tax relief of up to $1,080 for singles and a maximum of $2,160 for couples. In addition, by reconfiguring tax brackets, the government has reduced the likelihood of bracket-creep and potentially made personal financial planning and management much easier.
The RBA interest rate cut
As widely predicted, the RBA shaved 25 basis points off the official cash rate, bringing it down to an unprecedented 1.0 per cent, and follows a similar cut in June – the first consecutive cut since 2012. With the ‘Big Four’ banks passing on all or most of the cuts to customers, it has the capacity to potentially save mortgage-holders thousands of dollars this financial year. This lead by the big banks was followed by smaller lenders across the board.
APRA regulation changes
As flagged last financial year, APRA has agreed to soften its lending criteria on banks in order to add impetus to the housing market. Previously, applicants needed to prove to banks that they could service a loan at 7.0 per cent interest, even though actual mortgage rates were much less than that (and not looking to rise significantly in the short-term). Recognising that this risk-mitigation strategy was actually counter-productive, the banking regulator agreed to a new criteria that replaced the fixed percentage with a 2.5 per cent ‘buffer’ above the negotiated mortgage rate, that applicants would now need to satisfy. Lowering the servicing criteria means that previously unsuccessful applicants may now stand a better chance of being approved, while already-successful applicants may be able to borrow more, thus opening up purchasing options.