A new financial year presents a whole new world for borrowers
It feels like everyone’s champing at the bit to see change in the sluggish property and lending sectors in Australia. The central bank consecutively cut cash rates to new lows, banks have quickly responded, the regulator has relaxed the serviceability floor for borrowers, non-bank lenders are back with a vengeance, and we’re seeing more first home buyers bidding than at any other period in the last seven years.
The log-jam of loans that has been one of the factors stifling buyer activity has been shifted somewhat this month, thanks to changes by the regulator. The result of which is intended to be a reversal in the housing market downturn that started nearly three years ago.
Lower interest rates and a loosening of mortgage lending criteria has helped put a much needed floor under property prices. The impact of this can be seen through the likes of Core Logic's preliminary clearance rates topping 70 per cent in both Sydney and Melbourne; locations that provide a veritable litmus test for the nation’s housing sector.
Another sign is renewed confidence in new-to-market participants. Recent data shows the proportion of first-home buyers signing up to owner-occupier loans reached nearly 30 per cent last quarter. It hasn’t been that high as a proportion of the buyer pool since 2012! First home buyers are no doubt encouraged by lower interest rates, somewhat cheaper house prices (though those typically unaffordable markets remain so for the majority) and lending rules that allow more people to borrow and to borrow more.
Further, we’re seeing digital evidence that existing owners are eager to get a better home loan rate. One online aggregator said there had been a whopping 400 per cent uplift in those researching for information on the fees associated with breaking a fixed rate home loan, and a 300 percent uptick in variable rate home loans searches over the same period. Australian’s are certainly more financially in control and open to alternatives than previous decades.
In the flurry of activity is a renewed enthusiasm to enter the real estate market. Those looking to buy still need to canvas all options. My real concern is that buyers may grab loans or make offers that have not been fully considered. The thing to remind your clients of is that the borrowing process can be both thorough and fast. It doesn’t cost your client any more money or time to get a pre-approval, but it might cost them significantly not to shop around and seek the expertise of a broker, particularly with so many new factors influencing the property and lending sectors.
If you’d like help to understand some of these trends and complexities, I’m only ever a phone call or email away to support you and your clients.