Tax Cuts Set to Enhance Borrowing Potential

Griffith home buyers are poised to experience an increase in their borrowing power starting this July, thanks to the anticipated stage three tax cuts. These changes are not just a boost for potential buyers; they also represent a pivotal moment for residents considering upgrades and for those approaching their finance brokers to explore new opportunities.

The tax cuts tare designed to alleviate the financial strain on homeowners currently struggling with their mortgage repayments, potentially preventing some from being forced into sales. More directly, the cuts will expand the borrowing limits significantly: individuals earning $100,000 could see their borrowing capacity rise by $24,000 to $548,000. Similarly, those with a $150,000 income might be eligible to borrow an additional $41,000, enabling a purchase of up to $800,000, while families earning $200,000 could see an increase of $50,000, pushing their borrowing capacity to just over $1 million.

Use the tax cuts calculator to find out how the changes will impact you. The changes will apply to all taxable income you earn from 1 July 2024.

Redom Syed from Confidence Finance notes that these new tax adjustments could enhance borrowing capacity by up to 6% for middle-income earners and by 5% for higher-income groups. This shift comes after a challenging period where borrowing capacity had diminished by 30% following 13 cash rate hikes since 2022.

However, the broader property market still faces constraints due to the serviceability buffer mandated by the Australian Prudential Regulation Authority (APRA). This regulation requires borrowers to demonstrate the ability to service loans at rates 3% higher than the current mortgage rates, influencing not just thecapacity to buy but also the price levels accessible to buyers.

With interest rates currently a hot topic among economists, predictions about the timing of rate reductions vary, with some expecting cuts as early as June. This is a delicate balance for the Reserve Bank of Australia (RBA),which must consider these tax cuts’ effects akin to a reduction in cash rates of between 0.5% and 0.75%, according to economist Chris Richardson. Such a significant impact could potentially delay further rate cuts by the RBA.

For Griffith residents and home buyers, the upcoming tax cuts present an opportune time to consult with finance brokers to fully understand how these changes could benefit their buying power and overall financial planning. As the property market continues to evolve, staying informed and prepared will be key to maximizing the benefits from these fiscal adjustments. Now might be the perfect time to start researching the market.