With interest rates at record lows, many lenders are reporting a surge in loan applications as borrowers seek ways of giving themselves an interest rate cut, especially with the official cash rate on hold indefinitely.
At the same time, first-time borrowers, upgraders and investors with income security are set to pounce on quality well-located properties as the traditional spring market heats up. To avoid missing out, the savvy buyers are well prepared with a preapproved home loan.
What is driving the surge in home loan approvals
While some of these home loan applications will be from genuine buyers, there are plenty of existing borrowers seeking to refinance into lower rates – including those with fixed-rate loans.
In truth, many of these borrowers fixed their mortgages before COVID-19. However, the combination of even lower rates and the refinancing rebates offered by the
banks are offsetting some of the break cost and fees that would typically
discourage borrowers from switching out of a fixed-rate mortgage.
Refinancing with a broker is a worthwhile exercise
Generally, borrowers are enjoying much better interest rate outcomes on their home and especially investment loans in the current environment through refinancing.
That said, credit is tightening slightly, and approvals are a little harder to achieve, but our team at Our Broker are getting our loans approved with a little bit of elbow grease. On the flip side, there are many cases of borrowers going direct to a lender and missing out on approvals for new loans. Potentially, the customer would be able to borrow elsewhere. It is some bank’s policy that’s the problem!
We offer choice so, before contacting the bank, talk to Our Broker Finance as we can match you with the right home or investment loan.
The impact of lower interest rates on the property market
The property market is at an interesting juncture and is being underpinned by lower interest rates and drop in the number of properties for sale. More significantly, a large portion of the population isn’t financially affected by COVID-19, and in fact, many have found their positions have improved. Consequently, there is an “undercurrent” of people either looking to take their first step onto the property ladder, upgrade or invest with the expectation that the market has slowed, and they want to take advantage.
As we return to business as usual, consumer sentiment will improve on the back of super-low interest rates. In fact, this week, the ANZ-Roy Morgan Consumer Confidence index was up 4.1pts to 92.7 on August 22/23, 2020, which is its highest point since late June. On this basis, it feels like we are heading into a potential period of real estate growth leading up to Christmas.
It’s fair to expect the level of demand and growth will develop back to preCOVID-19 levels by the start of summer. This forecast is subject to the Australian economy avoiding another wave of the virus or some international financial shock – clearly, it’s a case of watch this space as the US Presidential race continues it run-up to the first Tuesday in November.
On the lending front, my advice to aspiring borrowers is to get a preapprove loan and have a balanced look at the market. Properties that aren’t well presented or are in less favourable locations are more likely to go to market at a more affordable price.