The four biggest trends in home loans this winter
COVID-19 has done some strange things to the mortgage market. Here are some of the biggest trends I’m seeing in home loans this month.
Client requests for refinancing are through the roof at the moment. It all started back in April, when Australian home-owners refinanced to the tune of $12 billion^. This is a huge volume of refinancing activity. Or so I thought, because then along came May and $15.1 billion^^ worth of loans were refinanced!
That month, for the first time in Australia’s history, the value of refinanced loans was almost as high as the value of loans for property purchases. In just 30 days, 33,712^^^ people refinanced and, interestingly, three-fifths of those refinancers changed lenders. This is a serious shift in borrower behaviour.
You see, often I hear clients say that they’d like to stay with their bank or lender; they want me to see if I can get them a lower rate within an institution that is familiar to them. These days, it seems that old-school loyalty is gone. And for the better. It’s about getting more money in your client’s pocket, right?
If your client hasn’t refinanced yet, I urge you to get them to take advantage of these strange times. I’m only a call, email, Zoom meeting or sms away.
2. HomeBuilder grant
The federal government’s HomeBuilder grant is one of two schemes encouraging first home buyers into the market. According to a Westpac poll, two thirds of Aussies aged under 30 are more serious about buying a home since covid hit Australia!^^^^
The HomeBuilder initiative is worth $25,000 but with some very specific caveats to it: firstly, the borrower needs to be purchasing a new home for less than $750,000 - which is pretty standard for first home buyers - and their income needs to be sub-$125,000 for singles and under $200,000 for couples.
But time is of the essence, borrowers need to sign a contract for their house and land before December 31 2020 and start construction within three months.
3. First Home Buyer grant
In Queensland, first home buyers can also qualify for the $15,000 State Government grant for purchases or constructions of up to $750,000. The borrower must occupy the property as their principal place of residence for at least half a year within a year of the settlement or completed construction. A stamp duty concession is also available.
In New South Wales, first home buyers of new homes can receive a grant of $10,000 on homes up to $650,000 plus full concession on the hefty old NSW stamp duty.
In Victoria, the home has to be under five years old and under $750,000 for borrowers to receive $20,000 or $10,000 assistance depending on whether the home is in a regional or metropolitan area. There are some stamp duty exemptions available also, and additional incentives for buyers of off-the-plan properties.
In South Australia, only new property purchases built after 15 October 2012 and constructions are eligible for the State grant of up to $15,000. The same rules outlined in the Queensland grants regarding occupying the property apply in South Australia.
But if you were going to buy anywhere based on first home buyer concessions and grants, you wouldn’t look past Western Australia where the State Government has introduced a $20,000 Building Bonus package in addition to the federal HomeBuilder grant and the state’s existing $10,000 first home owner grant as well as stamp duty concessions.
On the other end of the scale, Canberrans don’t receive any such grants anymore. Instead they are exempt from stamp duty if they earn under $160,000 as a household.
In the Northern Territory, there’s a $10,000 grant if you are purchasing or building a new home as well as a similar BuildBonus scheme to the West Australians. There’s a significant first home buyer grant worth $20,000… but your client would have to act fast, there’s a limit of 600 of those grants available.
In Tassie, there’s $20,000 available for new homes until 30 June 2022: bought or built, plus 50 percent off stamp duty for homes up to $400,000. Again, you have to live there for at least six months in that first year.
4. Cost effective lenders mortgage insurance (LMI)*
Midway through last month, one bank did something quite surprising. St George announced lenders mortgage insurance of just $1 on particular loans. Nope, that’s not a typo; $1 for eligible first home buyers with LVRs up to 85% and loan sizes of up to $850,000. There are some additional requirements too, but we can discuss those with eligible borrowers.
The point is that they’re acknowledging the challenge of saving a deposit, and unlike other government concessions, there’s no income cap on the borrowers, and no prerequisite to be receiving a first home owner grant.
LMI can cost thousands of dollars in a one-off payment, so this is quite the incentive for those who haven’t saved the necessary deposit. Just remember, LMI is not for your benefit it is to protect the bank!
This offer isn’t an LMI waiver. LMI is subject to approval and you must adhere to LMI obligations during the loan agreement. Offer current as of 13 July 2020 and may be varied or withdrawn at any time.
All in all, there’s plenty going on in the home loan space this winter, and a tonne of incentive for borrowers. If your clients have any queries at all, send them my way for a chat.
*Disclaimer: Any refinancing/access to home equity is subject to lender imposed terms and conditions including but not limited to loan serviceability, valuations and confirmed capacity to service both any existing and revised lending arrangements. This document has been created by Loan Market Pty Ltd (ABN 89 105 230 019, Australian Credit Licence no. 390222). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter. You should before acting in reliance upon this information seek independent professional lending or taxation advice as appropriate specific to your objectives, financial circumstances or needs. Information included has been sourced from third parties and has not been independently verified. Accordingly, Loan Market Pty Ltd is not in any way responsible for nor provides any warranty express or implied as to its accuracy or relevance.
^“Get a better deal, urges RBA’s Lowe”, The Australian, Lachlan Moffet Gray, 21 July 2020
^^^^“Pandemic’s surprise boost to first homebuyers”” Daily Telegraph, Aidan Devine, 19 July 2020