Finance Demand is still relatively quiet
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 58 responses.
The main themes to come through from the statistical and anecdotal responses include the following.
Overall demand for financing is low reflecting quiet times in the real estate market.
There has been a slight lift in borrower preference for fixing their mortgage interest rate three years. But the two year term remains the overwhelming favourite.
The investor part of the market remains far quieter than that for first home buyers.
Bank willingness to advance finance appears strong.
Compared with a month ago, are you seeing more or fewer first home buyers looking for mortgage advice?
Broker observations of the number of first home buyers in the market for finance advice fell away sharply in the two months after the US attacks on Iran. Since then they have recovered slightly but remain at levels weaker than before late-February.
A net 12% of mortgage advisors this month have said that they are seeing fewer first home buyers, little changed from 14% last month and 16% two months ago. The early-April result was a net 54% negative.
First home buyers recognise that time is on their side, and banks are responding to their hesitancy with continuing mild easing of lending criteria.
Comments on bank lending to first home buyers submitted by advisors include the following.
Banks are more willing to workshop tight deals to get across the line. Doors open for new-to-bank high LVR approvals.
I have not noticed any changes, but bank test rates have increased slightly so that will have a minor restricting outcome.
There are a few more pre-approval options for buyers with less than 20%, but very few real changes.
It is getting easier to get a loan approval for above 80%.
Compared with a month ago, are you seeing more or fewer investors looking for mortgage advice?
A net 29% of advisors in this month’s survey have said that they are seeing fewer investors in the market. This is unchanged from last month but better than the net 48% negative results of April and May.
Investor interest in purchasing property and refinancing existing arrangements rose in 2023 after first home buyers entered the market to take advantage of conditions favourable to them.
But once interest rates started creeping higher late last year that interest relatively quickly backed off. Further pulling back followed the outbreak of war in the Middle East.
With the monetary policy tightening part of the interest rates cycle now underway and hostilities clearly not fully over in Iran, weakness in the investor part of the financing market looks likely to continue for some time.
But as one broker notes, the weakness is mainly from the group of investors focussed largely on capital gain as opposed to those approaching the market with somewhat better capital and attitudes towards yield.
Comments made by advisors regarding bank lending to investors include the following.
Haven’t seen many investors but the ones who are looking have got good equity and a long term plan rather than speculation to sell for capital gains.
Banks are happy to lend money over DTI of 7
Banks are digging into the security especially if it may not be Healthy Homes compliant, as well as the costs to bring up to standard.
Much stricter on assessing the security.
10 year interest-only lending getting popular.
Compared with a month ago, are you finding lenders more or less willing to advance funds?
The lender caution which appeared immediately following the outbreak of hostilities in the Middle East has eased off over the past two months as oil prices have eased and perhaps as it has become clear to banks that their mortgage sale targets will likely not be met this financial year.
This month a net 36% of brokers have said that banks are more willing to advance funds, up from 29% a month ago and just 2% two months back.
What time period are most people looking at fixing their interest rate?
The focus of borrowers remains very strongly on the two year time period according to 72% of brokers responding in our monthly survey.
Very few borrowers favour the traditionally popular one year term.
The two year term for fixing one’s mortgage interest rate has been highly popular since December last year as people observed fixed mortgage rates coming off their lows.
Of interest this month is a small lift in preference for the three year term, cited by 14% of brokers compared with 6% last month.
Are more property owners asking about refinancing?
A net 14% of brokers have this month said that they are receiving fewer requests for refinancing. This year so far, the level of refinancing interest has been noticeably lower than for the entire period from mid-2023 until the end of 2025.
