Let’s dive into the key implications for mortgages and property investment following the 2024 Federal Budget.
Six key areas of impact follow the budget announcements:
- Interest rate environment.
- First-home buyer assistance.
- Sustainability incentives and green lending.
- Tax relief on student loans.
- Tax relief on income tax.
- Increased spending, investment, and support.
Interest rate environment
Economic stimulus and growth depend heavily on the cash rate decisions the Reserve Bank of Australia (RBA) makes and its impact on interest rates. Obviously, a favourable interest-rate environment supports affordable borrowing conditions for mortgages and people investing in property.
An expansive Federal Budget with significant spending could lead to higher inflation, prompting the RBA to increase rates to cool the economy. Higher interest rates would make mortgages and other loans more expensive.
First-home buyer assistance
To help enable first-time home buyers who are low-to-moderate income earners, the shared equity scheme “Help to Buy” aims to help through two measures:
- A reduced deposit being required.
- An equity stake of the property’s value being covered by the government to be paid off over time or when the property is sold.
The equity stake contribution will either be:
- New homes up to 40% in government contribution.
- Existing homes a 30% government contribution.
To be eligible for the Help to Buy scheme, thresholds will apply to buyer’s income for both individuals and couples. Importantly, it’s conditional on those buyers staying within those thresholds during the time they own the home.
The Help to Buy scheme is yet to pass parliament and it’s set to be rolled out in Queensland first. The Federal Budget has committed $5.5 billion to the Help to Buy scheme.
The Budget Papers[1]suggest there’s no new funding commitments to the Home Guarantee Scheme.
Sustainability incentives and green lending
The budget's focus on sustainability and climate action presents unique opportunities for people interested in environmentally friendly housing through innovative green lending products. Lenders may be motivated to offer competitive terms for “green home loans”, through increased market interest in sustainable living.
Tax relief on student loans
Existing student loans will have its indexation rate capped to either CPI or wage price index—whichever is lower. This relief is backdated to 1 June 2023 and the index rate is much lower than the previous 7.1 percent last year. This means credits will be applied to student loans and will reduce the current loan debt amount.
But it’s important to understand this is still a debt that will increase the longer it takes to pay off. Once the government credits are applied, people should consider how to pay out to improve both borrowing capacity (if looking at a loan soon) and overall financial health and budgeting. It’s worth a chat with your Get Real Finance broker to assess whether to consolidate debt or restructuring loan terms to pay out student loans.
Income tax relief
Low and middle-income earners will receive extended relief to give more disposable income for people in these brackets.
The tax brackets are also adjusted to prevent “bracket creep”, where inflation pushes incomes into higher tax brackets.
Increased spending, investment, and support
Other measures include:
- Job creation and economic growth offered by investments in infrastructure projects. Property markets in those regions with key infrastructure developments could be positively influenced in terms of property demand and new mortgages.
- Investments in affordable housing projects and social housing projects aims to increase the supply and access to those who need support. Projects/funds/initiatives named in the Federal Budget include: Housing Australia Future Fund (HAFF), National Housing Accord, Social Housing Accelerator Payment, Affordable Housing Bond Aggregator, and the National Housing Infrastructure Facility.
The team at Get Real Finance can help
There’s obviously a whole range of relief and stimulus available for people in a range of circumstances. The impact on your take-home pay, business income, and investment returns will likely change following the Budget. At the same time, your personal circumstances could have changed or will change soon…This could be school fees due to start or end, a relationship breakdown or start up, it’s time for a new place to call home or to find an investment property.
Whatever the scenario, we’re here to support our clients by recommending ways to improve cash flow.
Call us on 07 3852 5755 or email us at admin@getrealfinance.com.au to book an info and strategy sesh.
[1]https://budget.gov.au/content/bp1/download/bp1_bs-4.pdf(Accessed 17 May 2024) Statement 4: Meeting Australia's Housing Challenge; page 161.
