More Australians Looking To Buy A Home Now Than Ever

Published by Otto Dargan on November 3, 2020

Consumer sentiment is on the rise but is it enough?

The government’s unprecedented level of stimulus amidst the COVID-19 pandemic such as the Jobseeker, Jobkeeper, HomeBuilder have helped restore confidence in the economy. According to the Westpac-Melbourne Institute Index of Consumer Sentiment, confidence in the economy has rebounded by 11.9 per cent to 105.0 in October. It represents a 10% rise above the average level in the six months prior to the pandemic. However, some uncertainty still remains as to what will happen when the government stimulus packages are slowly pulled back starting next year.

Owner-occupier loans see the highest increase since records began

More Australians are looking to buy their home now than at any time in the last 18 years according to data released by the Australian Bureau of Statistics. The month of August saw $16.3 billion in owner-occupied loans – a rise of 13.6 per cent, highest since record-keeping began. This rise was preceded by another record rise of 10.7 per cent in July. This increase was largely led by first home buyers with about 12,302 home loans secured by first home buyers in August, an increase of 17.7 compared to the previous month. Possibly fueled by record low-interest rates and the federal government’s First Home Loan Deposit Scheme (FHLDS), which allows eligible first home buyers to buy a property with a deposit as low as 5% of the property value instead of the usual 20% of the property value. In its 2020-2021 federal budget, the government announced a further 10,000 scheme places for first home buyers looking to buy new or newly built properties under the FHLDS – New Home Guarantee (NHG). A few of the major banks have already started putting eligible applicants on a waitlist. As more details of the scheme are announced, we expect first home buyers to quickly snap up these slots.

Lending Indicator – September

Australian Bureau of Statistics’ (ABS) latest Lending Indicators from September 2020 showed:
  • total value of new loan commitments (seasonally adjusted) rose 5.9 per cent
  • owner-occupier home loan commitments jumped 6% to $17.3 billion
  • construction of new dwellings surged 25.3 per cent, following a 19.2 per cent rise in August.
The report also noted that “Owner occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives. For example, it is likely that the HomeBuilder grant is contributing to increased demand for construction loans.”

Home loan interest rates at record lows

Whether or not, now is a good time to buy remains uncertain. Some would argue there is never a wrong time to buy the right property, while others remain sceptical. However, what is undoubtedly clear is that home loans are the cheapest they’ve ever been. With home loan interest rates already at around the low 2 per cent, the Reserve Bank of Australia cut the cash rate today by a further 0.15% (15 basis points). The official cash rate now stands at a new record low of 0.10%. We expect that lenders will focus on being highly competitive with rates to win new business. Nonetheless, it remains to be seen which lenders actually pass on the rate cut to their existing customers.

Borrowers across the board see their borrowing power increased

What’s more, borrowers have seen an increase in their borrowing power by as much as 22% due to lenders dropping their assessment rate compared to last year. And with proposed changes to how living expenses are assessed, borrowers are expected to see a further increase in their borrowing power starting early next year. This may mean customers who were declined in the past may get approval, or they may get approval for a larger loan amount because the banks are actually more flexible around what customers are actually spending.

Are you looking to buy?

First things first, if you’re looking to buy, then always get a reliable pre-approval. Not all pre-approvals are created equal!

To get a reliable pre-approval, please speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our online assessment form.

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