Quiet mortgage market conditions
Each month we invite mortgage advisors around the country to give insights into developments in the residential real estate market from their unique perspective. Our latest survey has attracted 63 responses.
The main themes to come through from the statistical and anecdotal responses include the following.
Brokers continue to report slow bank processing times and concerns that banks are outright favouring direct to bank clients over those brought to them by the broker channel.
There remain both investors and first home buyers in the market. But levels of interest are not necessarily strong.
Banks are competing for business with cashback offers and still some slight tweaking of lending criteria here and there.
Compared with a month ago, are you seeing more or fewer first home buyers looking for mortgage advice?
The fresh surge in first home buyer activity in the real estate market which happened in the second half of last year reached somewhat of a plateau from the June quarter of this year.
But still a net 8% of brokers responding in our survey report that they are seeing more young buyers in the marketplace.
Comments on bank lending to first home buyers submitted by advisors include the following.
Status quo, with very minor tweaks to policy settings, and just longer wait times.
Lack of preapprovals above 80% are still restricting FHB confidence to put in offers on properties. Bank turnaround times are the other restricting factor
Requirements for servicing surplus recently reduced by some banks.
Not much change in the banks’ policies. Some lenders are being able to use two boarders for clients with less than 20% deposit, this gives a slightly higher approval amount. The amount of loan being approved by the banks is not much of the issue, the issue is buyers have too much choice at the moment and that is making them take a longer time in finalising their decisions.
Compared with a month ago, are you seeing more or fewer investors looking for mortgage advice?
Only a small net 6% of brokers say that they are receiving more enquiries from investors looking to make a property purchase.
On two occasions since early-2023 investors have stepped forward showing purchasing interest, and two times this interest has quickly faded. A third upturn does not appear at hand.
Having said that, brokers have noted some improvement in bank willingness to lend to investors.
Comments made by advisors regarding bank lending to investors include the following.
Harder on expenses shown by the clients. More drilling on expenses is done now.
Some banks are introducing a 10 year interest only period and those that aren’t are losing business with investors financing elsewhere.
Competitive in the cash contribution market
They are a little more willing to take gross rental income rather than trolling through financial accounts if equity is good on their portfolio or at least the properties offered as security
Investors can purchase brand new property with less than 20% deposit and some of the brand new properties have come down a lot in their asking prices, making it attractive to purchase for investment. The yield on them is getting better especially the two bedroom ones. From the banks’ point of view, it is good as they can lend to investors. Getting more approval done for the investors now as opposed to 6 months ago.
Compared with a month ago, are you finding lenders more or less willing to advance funds?
There has been a lift this month in the net proportion of brokers saying that lenders seem more willing to advance funds – to 24% from 13% in each of May, June and July.
As noted here previously, the period of extreme unwillingness or inability of banks to lend finished in the middle of 2022. The next change after that was a lift in credit availability early in 2023. That is the time when first home buyers came to dominate the market.
What time period are most people looking at fixing their interest rate?
With almost no fear evident of interest rates rising for a long time and with some extra easing of monetary policy anticipated, borrowers are mainly fixing for short time periods.
42% of advisors say that people most prefer the one year fixed rate term, 21% 18 months, 23% two years, and 15% three years.
Note that many people split their loan across a number of terms – though still for just short time periods.
This graph shows the changes in the proportion of agents saying people prefer fixing one year. Things have changed by little in the past four months.
Interest in fixing for two years remains mild.
There has been a further small lift in borrower preference for fixing three years.
Are more property owners asking about refinancing?
A net 33% of mortgage advisors have reported that they are receiving more enquiries about refinancing. This may reflect the large volume of fixed rates coming up for renewal before the end of this year plus awareness of cashbacks which banks are offering new clients.
