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Finance

Investors Lead Home Loan Rush

Home Loan

Property investor lending in January has risen by 10.5 per cent, lifting the overall value of home loans to $28.7 billion in the month—an increase of 43 per cent on 2020.

The surge in the latest Australian Bureau of Statistics figures occurred across all states and territories, with the exception of the Northern Territory, to be 44.3 per cent higher year on year, the largest annual growth on record since 2003.

Owner-occupier lending for homes rose 10.9 per cent in January, 52.3 per cent higher than in January 2020, with first home buyers increasing by 9.6 per cent to be at the highest level since May 2009, mirroring the similar uptake following the global financial crisis and the introduction of the first home-owner grant.

Investor lending for housing lifted by 9.4 per cent, capping a 22.7 per cent rise across the last twelve months and revealing a renewed appetite in new loan applications.

The lift marks the the largest rise in new loan commitments for investor housing since September 2016.

The number of first home buyer loan commitments for investment purposes accounted for 4.4 per cent of all first home buyer commitments.

The HomeBuilder program, which offers grants of $25,000 to help construct or renovate a property, is also contributing to an increasingly febrile market.

 Home Loan

▲ The value of loans for alterations and additions in the three month to January 2021 is 40.8 per cent higher than the same time the previous year.

“Since the HomeBuilder grant was introduced in June 2020, there have been record rises in the value of construction loan commitments,” ABS head of finance Katherine Keenan said.

“Loan applications made late in 2020—prior to the reduction of the HomeBuilder grant on 1 January 2021—contributed to the strong rise in January’s construction loan commitments of 15.7 per cent.”

The value of new loan commitments to owner occupiers rose 10.9 per cent, the largest monthly increase since August 2020.

Owner-occupier first home buyer loan commitments accounted for 36.5 per cent of all owner occupier commitments.

Despite 6.5 million Victorians being put through two lockdowns in the lead up to January, the value of new loan commitments to investors also rose 12.9 per cent in the state across the month.

ANZ economist Adelaide Timbrell said Victoria has continued to play catch-up after its lockdown, with its total new lending moving from 15.2 per cent year on year in December to 29.7 per cent year on year in January.

“Government support is adding to the momentum of housing lending, with stamp duty concessions in Victoria, the first home owner deposit scheme and other first home owner concessions all reducing the initial cost of home purchases.

“Low rates—including an outlook of continued low borrowing costs—are fuelling the housing market more than other parts of the economy,” Timbrell said.

Loans to owner-occupiers for the construction of a new dwelling in the three months to January 2021 compared to the same time last year has tripled in Western Australia, up 221.7 per cent and more than doubled in Queensland to 164.9 per cent.

The Northern Territory recorded a 160.3 per cent boost while Tasmania and Victoria also recorded spikes of around 100 per cent.

HIA economist Angela Lillicrap said investors were now returning but remained more active in the market for established dwellings.

“The value of lending to investors increased by 17.6 per cent in the three months to January 2021 from the previous quarter.

“Low interest rates, rising house prices, higher savings and a demographic shift in demand towards detached housing and regional areas should ensure ongoing demand,” Lillicrap said.

National house prices grew slightly by 0.9 per cent in January to surpassed pre-Covid levels by 1 per cent, and be 0.7 per cent higher than the previous September 2017 peak.

 

Article Source: theurbandeveloper.com

Finance

How will the end of mortgage deferrals affect the housing boom?

mortgage deferrals

Australia’s red-hot property market has enjoyed extraordinary support from the federal government’s economic stimuli, wage subsidies and leniency in lending policy from the banks.

A key question now is how the market will adjust as this COVID-19 induced emergency support is wound back.

At the height of the worst peace-time recession in a century last year, banks pulled out all stops to avoid a meltdown in the asset that dominates their loan books: residential property.

Home loan and small business customers were given an option of putting their loan repayments on hold, and hundreds of thousands took up the offer. At the peak, banks allowed some $250 billion in small business loans and home loans to be put on hold.

These deferrals officially ended at the end of March and banks say the vast majority of affected customers have returned to making mortgage repayments. However, a small minority are still struggling – some may need to eventually sell their properties.

Commonwealth Bank provides a case in point. It says the overwhelming majority of people who deferred have returned to making repayments or restructured their loans. About 1.9 per cent are working with teams that help sell properties.

The bank has a moratorium on forced sales by owner-occupiers until September.

CBA retail banking group executive Angus Sullivan expects the end of deferrals would have a “very, very marginal” impact on the supply of homes for sale, as it would probably be overpowered by the stimulatory impact of ultra-low interest rates.

“I think the driver of the housing market, first and foremost, is probably low rates,” Sullivan says.

CBA’s rivals have experienced similar trends. National Australia Bank had 1037 deferred home loans at the end of February after allowing about 110,000 people to pause repayments last year.

“Given the significant number of customers who have returned to making repayments and additional support available, we don’t expect the end of deferrals to have a material impact on the housing market,” says NAB’s group executive for personal banking Rachel Slade.

Westpac has about 2000 loans in deferral – a tiny proportion of its mortgage book, while official figures last week showed ANZ Bank had 0.9 per cent of its housing loans in deferral at the end of February.

However, the end of mortgage deferrals could still weigh on some parts of the property market.

CoreLogic research director Tim Lawless says the risk from deferred loans has “significantly diminished,” though parts of the market dominated by investors could still feel the impact of deferrals ending.

Banks have not said where most of the remaining deferred loans are located, but Lawless says they are probably concentrated among investors, particularly in inner-city Sydney and Melbourne apartment developments. He believes banks would start being less patient with struggling property investors.

“Just reading between the lines, it seems like there will probably be less flexibility for investors,” he says. “It’s a net negative for the housing market but I think the impact will be quite localised.”

Like the banks, Lawless believes the broader property market has enough momentum to offset the impact of loan deferrals ending, but he does not think the pace of price growth can continue for much longer.

It is clearly not sustainable for Australia to continue notching up the fastest growth in house prices since the 1980s at a time when household incomes are not rising. It will simply get too expensive for buyers to keep bidding up prices.

The end of JobKeeper and other government schemes, including building grant program HomeBuilder, are also likely to temper the red-hot demand for housing in the months ahead.

 

Article Source: www.brisbanetimes.com.au

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Finance

New low as Homestar Finance cuts its two-year fixed owner-occupier rate to 1.74%

Homestar

Homestar is equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

Homestar Finance is offering the lowest two-year fixed rate in the home loan market.

Homestar Finance has cut its two-year fixed owner-occupier rate by 14 basis points to 1.74%.

The rate cut move knocks Westpac from the top spot after it offered the lowest rate.

The increased rate competition was dubbed a “raging rate war” by the Mortgage Professional Australia website.

“This loan is the lowest two-year fixed rate on the market and also the lowest overall home loan rate available nationally,” RateCity research director Sally Tindall told The Australian.

“It also has one of the most competitive revert rates at 2.24%.”

Some 450 fixed mortgage rates have been cut over the last two months.

Homestar is also equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

Greater Bank has the lowest fixed rate in the market, with its one-year fixed rate sitting at 1.69%, with the rate only available to customers in New South Wales, Queensland and the Australian Capital Territory.

 

Article Source: www.urban.com.au

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Finance

Warnings over proposed overhaul of responsible mortgage lending

mortgage lending

Record high mortgage lending to owner-occupiers, surging property prices and lenders offering low deposit mortgages could make for a perfect storm if the government’s attempt to repeal responsible lending obligations is successful, critics warn.

They say loosening responsible lending obligations would add fuel to the already hot property market and increase indebtedness, leaving home owners struggling to meet repayments if interest rates were to rise.

Figures from the Australian Bureau of Statistics for January show a 52 per cent increase in the value of new home lending to owner-occupiers compared to January 2020.

The government says repeal of responsible lending obligations is needed to free up credit, particularly to small and medium-sized businesses, and to remove red tape for lenders and borrowers. It says the protections for vulnerable customers are preserved.

The responsible lending obligations have been a bulwark of consumer protections since coming into effect in 2009. They require lenders to make credit assessments and approvals in accordance with the obligations and help ensure people are not being sold into unaffordable loans.

The government decided to pursue repeal of the obligations last year, during the depths of the COVID-19, after consultations with banks, as a way to get credit flowing through the economy again.

But with the economy staging a V-shaped recovery, house prices booming and mortgage lending for owner-occupiers at record levels, critics, including researchers, many consumer rights groups and some economists, say the responsible lending obligations are needed more than ever.

“It’s crazy to think the government is still pushing ahead with the scaling back of responsible lending obligations at a time when the property market is going through the roof,” says Sally Tindall, the research director at RateCity.

 

Article Source: www.brisbanetimes.com.au

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