Tomorrow Budget 2021 gets announced and it likely to have implications for borrowers of all sorts. This morning I have seen an article announcing an new scheme similar to the first home loan deposit scheme (FHLDS) for single parents. Recognizing that for many people saving up the deposit is the hardest part of buying. I can see the value in this style policy and will be looking forward to seeing the full announcement. FHLDS is also likely to be extended as it has been a successful scheme with 20,000 people using the scheme so far. A few clients of mine and a sibling have successfully purchased and avoided paying mortgage insurance. The homebuilder scheme was very successful but it was expensive. The payment has already revised down, but I am not sure they will continue with this scheme. It did keep the building industry afloat during this covid period and I guess the budget 2021 announcement will go through the numbers. With an explanation of why or why not it will be continued.

The $10billion additional funding for aged care hopefully will address many of the issues in the industry. I would expect with our aging population, this will lead to construction in these areas and both direct and indirect employment.

I am also curious to see if the proposed changes to lending regulations are mentioned in or with the budget. I currently have clients that are looking forward to the changes as they are likely to positively impact self employed borrowers and investors.

Probably the biggest issue in the lending world is low wage growth. As loans are a function of income (and expenditure), having no growth in wages constricts borrowing capacity, though it currently doesn’t seem to be affecting the property market as interest rates are low which is keeping borrowing capacity higher. Most lenders are using a servicing rate in in the 5-6% range, 2 years ago this was 7-8%. How the government plans to address wage growth will likely be mentioned. The bench mark for what is considered “full employment” has been revised down from starting in the 5% bracket to now starting in the 4% bracket. How this is addressed is of interest to us all.

Over the next week I will be watching multiple webinars dissecting the budget and I will write a follow up with the interesting parts of the budget for lending.

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