Are your clients “bid ready” for this unconventional Spring selling season?
As positivity reemerges in the property market, and banks lower the testing rate on serviceability criteria, more of your clients may be planning on buying soon. Indeed, how much they can borrow today is likely vastly different to last month.
Talk that real estate prices have bottomed out and are stabilising in key markets provides a significant motivation for buyers on the sidelines to consider now entering the market. Combine that sentiment with movement in the finance sector, and it’s fair to assume we’re going to see more property market action this Spring.
A lot has changed in the borrowing space this month. The regulator recently scrapped its minimum testing rate as a means to stimulate economic activity in Australia, and this week major banks are starting to lower the interest rate they use to stress test customers' loan applications.
Two of the Big Four lenders have responded relatively immediately and led the charge on the change, announcing that they’ll loosen their mortgage lending rules. One of those lenders will be assessing the serviceability capacity of borrowers at just 2.5 per cent over their lending rate, a significant reduction on the minimum testing rate they used before the regulator removed the mandated floor.
Every one per cent drop in that floor lets home buyers borrow up to 10 per cent more, analysts say. Still, buyers will go to auction and make offers not knowing their borrowing capacity in this new environment. That crucial pre-approval is key to knowing your client’s bidding limits and helps give confidence that the buyer has the ‘in principle’ ability to secure a loan for that amount.
On top of this we have seasonal factors. In Spring we typically see more housing stock come to market and more buyers at inspections. Why? There’s lots of theories, but whatever the cause it happens every year like clockwork.
So let’s recap. We have more options for purchasing in terms of stock levels in real estate, more availability of cash thanks to changes to serviceability and rate decreases, and more talk that the market is stabilising. This predictably means you can expect your clients to be more inclined to enter the property market.
These concurrent factors; low rates, higher borrowing capacity, more housing stock and improved property value and sentiments are nuanced and complex. Let me work with you to help your clients navigate this market and secure the funds to allow their purchase to occur seamlessly in this new economic environment.