The race to the bottom; banks start zealously cutting rates

In the midst of a terrifying and rough summer for much of Australia, it’s odd to reflect on the season that has been for real estate. It’s been a while since the temperature of the housing and home loan market has been so pleasant. Record low rates, looser credit criteria, lender competition, government incentives, much more market activity and property price growth have been coinciding of late. The sentiment has changed and it can be seen in renewed investor and owner-occupier activity, banks proudly shouting about new low rates, and first-timers getting a gift from the government. 

Big banks have rushed out of the gates this January to win more borrowers by offering lower rates. Two of the biggest announced product rate cuts in the first few weeks of the year. Buyers are out in force too. We saw a jump in loan numbers and loan values in late 2019 heading into 2020, evidence that the market is back. Owner-occupiers took out more loans, and for greater amounts in the last month of last year, and investors took out bigger loans too. The market’s moving, and I’m hearing that some aspiring buyers-to-be feel they might get left behind. 

Some 50,000 home loans were approved for owner-occupiers throughout the month of December – an increase of 1.8 per cent on the months prior. Now that property policies are stable (remember a year ago the nation was in the midst of a heated debate over property tax concessions?) and the market is buoyant, investors too are back with a vengeance. They sought loans in November worth 5.8 per cent more than previous months.

Meanwhile, the first home buyer segment was a little standoffish in December, with a 0.7 per cent drop in their lending activity. I suspect many may have just been waiting for the 1 January 2020 start date for the new first home buyers incentive that allows them to contribute a 5 (rather than 20) per cent deposit, with the government guaranteeing the gap. (That scheme has proved very popular in the first two months of 2020. With only 10,000 slots available, the competition has been fierce. I worked with many first timers over the last half of 2019 to get their debts and savings in order ahead of the release of this incentive.)

The market’s moving, so what should your client’s next move be?

While 2020 appears to be an exciting time to get in the game, the home loan process is still as complex as it is competitive. If your client is talking about expanding their portfolio or entering the market for the first time, there are still home hoops we will need to jump through. 

Providing evidence of a positive background with borrowing (I recommend starting by getting a credit check through my system), having a solid savings track record, and getting pre-approval are crucial pre-house-hunting activities I can help with. 

Help your clients keep up with the moving market.