Finance in 2020: What to expect

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on January 06, 2020
Finance in 2020: What to expect

Photo by Yeshi Kangrang on Unsplash

What's in store for 2020? We take a look into our financial crystal ball.

2019 was a turbulent year for the Australian economy, with three rate cuts bringing the cash rate to a historic low of 0.75%. With borrowing cheaper than ever, house prices recovering, and fintech shaking up the industry, there are plenty of changes afoot in Australian finance. 

As we roll into the early days of a new decade, here's some of what you might expect to see this year.

Looking for a low variable rate home loan? The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of July 3, 2022. View disclaimer.

          1. More first home buyers entering the market

          Despite being met with some criticism, the First Home Loan Deposit Scheme has kicked off. 

          This scheme will help eligible first home buyers secure a home loan with as little as a 5% deposit while saving them from paying thousands for Lenders Mortgage Insurance (LMI) - which is typically required for loans with a deposit of less than 20% - with up to 15% of the property's value guaranteed by a government entity.

          To be eligible, first home buyers have to earn less than $125,000 a year, or $200,000 combined for couples. To ensure it is only used for the purchase of an entry level home, the scheme is limited to properties priced under the set limits for each state and territory.

          The scheme is also limited to 10,000 home loans per financial year - quite a small number, considering there are over 100,000 loans granted to first home buyers per annum.

          2. House prices continuing to rise 

          Property experts love to predict a boom and the conditions in 2020 seem ripe for rising house prices. House prices finished 2019 on a high with the national average lifting 2.3% over the year.

          CoreLogic's Head of Research Tim Lawless expects house prices to rise in 2020 before slowing down.

          "Housing values are expected to rise through 2020 across most regions, however, the year may bring about a change in the growth dynamic with the larger cities seeing a slowdown in the rapid rate of growth recorded through the second half of 2019," he said. 

          3. Rock bottom interest rates

          The Reserve Bank has signalled it will lower the cash rate in 2020, with most economists predicting a February rate cut and possibly another after that, bringing the cash rate to a rock bottom low of 0.25%.

          If the cash rate falls this low, expect home loans to fall well below the current low borrowing costs we're seeing below. 

          4. More customers turning to neobanks

          What's a neobank you ask? In a nutshell, it's a type of bank that lives entirely on your smartphone with no branches or the sort of online banking most traditional banks offer. Because they don't have the overheads a traditional bank does, they can pass these savings onto you in the form of better interest rates and lower fees.  

          Over 2019, Australia's neobanks were mostly focused on offering high-interest savings accounts, but 2020 could see more neobanks begin to offer competitively-priced home loans

          5. Open banking finally kicking off

          Initially set for launch in February, open banking has been pushed back to July.

          When it does launch, Australian consumers could have more control over their financial data, choosing how their data is shared and who with. It is expected to make it easier for people to switch to a better bank or lender, thereby encouraging more competition between banks and providers who will have to work even harder to offer their customers the best deals.

          6. Rising insurance premiums 

          Australia has been ravaged by bushfires over the last few months, and with the number of bushfire-related insurance claims climbing, pressure is mounting on home insurers to lift their premiums. 

          According to the Insurance Council of Australia, over $238 million worth of damage has already been logged since early November in 3,870 claims from 236 postcodes around the country. The number of claims is only expected to rise as the blazes continue to burn.

          7. Continued slide in new car sales

          If new car sales are the barometer of economic health, our economy is falling into the toilet. New car sales drove off a cliff in 2019 with just over 1 million new vehicles sold in 2019 - the lowest annual car sales figure since 2011.

          It's likely our new vehicle market will face similar challenges in 2020, with the possibility of a recovery.

          8. Flat employment and wages growth

          Wages growth has slowed to a halt over the last few years, and is likely to remain low for most of the year thanks to the softened economy.

          It's a similar story for the jobs market but if the economy starts performing after the rate cuts, the unemployment and underemployment rate could head lower which should drive up wages.

          9. Volatile share markets 

          With interest rates at record lows, many are expected to turn to the share market in the hope of making a half-decent return on their money.

          Globally, 2020 is expected to be another volatile year for the share markets with Trump seeking re-election, the potential for a US-China trade war, worries over the risk of a global recession, and the continuing uncertainty around Brexit. 


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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          author-avatar
          Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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