Changing Conditions in the Housing Market. Are you in the best financial position?
August 27, 2020
Recent times have seen financial conditions tighten within Australia, as with other economies globally, and the housing market has been affected by:
- The coronavirus pandemic;
- Recession; and
- Social unrest.
The Reserve Bank Board in Australia has implemented comprehensive policy measures to reduce funding costs within the economy and further support the supply of credit to households and businesses.
These measures have reduced Australian banks’ funding costs, housing and business interest rates, with rates reaching historic lows.
The Australian housing market is currently seeing a significant impact with house prices predicted to fall within the next 12 months. The market indicates that it is now an excellent time to borrow.
We are seeing lenders taking new measures to ease loan burdens for both households and businesses. Low-interest rates and forbearance policies from lenders have assisted in providing further insulation to housing values.
The Australian mortgage market changes are due to; historically low-interest rates, changes to the traditional way of banking and lending (where we now utilise the digital technology such as DocuSign and Esign for clients to sign loan offer documents), conducting virtual loan interviews with clients and government first home buyer incentives. The mortgage market has adapted to COVID-19 technology disturbances by modifying their processes online, which limits the disruptions to businesses operations.
The key areas that have been impacted are:
- COVID-19 has had a significant impact on listing volumes, but house prices have been relatively resilient.
- Low listing volumes and seller activity have constrained housing supply.
- Many view this environment as a temporary, enforced downturn, so vendors might be holding onto a relatively high expectation of their property value, planning only to sell when the economy starts moving again.
- Banks have allowed borrowers to pause mortgage repayments relieving financial stress and avoiding forced property sales.
- Technology has been proved as invaluable for the Australian property market, with 3D virtual tours introduced into marketing campaigns to help buyers see inside a property.
With the market more dynamic than we’ve seen in years, we’re able to negotiate impressive rates with lenders. This week there are some very low rates, with Owner-Occupied rates on the market from 2.59% Principle and Interest repayments.If you have an investment loan or are looking to buy an investment property, we see the variable interest rate on the market from 3.04%, Principle and Interest repayments.
Core Logic has recently released an article which compares the Mortgage Activity changes for 2020 vs 2019 financial years. It is clear from the figures shown for 2020 that 63.48 % of loan applications were refinancing, compared to 26.01% of applications which were for purchases. More people have opted to refinance their mortgage for reasons such as debt consolidation, better interest rates, better loan products, loan re-structure and lender cashback offers.
Fierce competition among home loan lenders will see rates continue to drop, and with refinancing on the rise, lenders will need to continue to reduce their rates to be in contention with borrowers.
We recommend reviewing your home loan rate at least once a year. If your home loan is over 2 years old, it may not be on a competitive rate anymore. Even a half percent rate drop can help you save thousands.
At Gow-Gates, we would be happy to provide a complimentary home loan review to save you time and money. Our core objective is to find our clients the best rates and offers on the market.
How we can help you:
Gow-Gates are well positioned in the financial and mortgage market to help you navigate through these uncertain times and meet your specific needs.
At Gow-Gates we can help you compare your current rate to ensure you have the best rate with a loan that suits and is tailored to your needs, in order to protect and grow your wealth.
Please contact our Mortgages Brokers for further information. Our highly experienced team can help to ensure your finance solution is the right one for you moving forward.
Head of the Mortgage Broking Team