Problems getting a loan and what it’s doing to Brisbane real estate
Up to 40% of Australian home loan applications are being declined at the moment, according to research from Digital Finance Analytics who surveyed 52,000 households. This is up from a reported 8% a year earlier and includes new loans and refinancing. It’s a huge number and given our unemployment rate is low, we all have jobs and interest rates are at historic lows, how can it be so many of us apparently can’t afford to borrow?!
Interestingly the Bees Nees Sales Team isn’t witnessing the same level of finance problems, with only around 10% of our sales held up or terminated due to loans being declined. Buyer enquiry for inner-Brisbane property in 2019 is stronger than we’ve seen for some time. But no matter how solid demand for property might be, few of us have the spare cash to buy our biggest assets. Banks and other lenders are a critical piece of the property environment. So in this post-banking royal commission property market, are money woes pulling Brisbane’s market down?
With so many of our national media based in the southern capitals it’s no surprise we’re witnessing headlines about “Australia’s property slump”. In the same way they wrapped us into their “property boom” assumptions over the past few years (while prices were only rising slowly in Brisbane), they’re now ignoring data showing Brisbane dwelling prices holding firm while Sydney and Melbourne drop 8-10%. The data says our market is not feeling any huge impact from a ‘credit crunch’ (if that’s what we’re having). So far, at least.
The ‘back story’ to the finance stats is about the different approaches from each of the lenders, according to Anthony Fuge from Brisbane mortgage brokers Impact Finance. Anthony says the reaction to APRA changes and the Hayne Royal Commission have created a huge range of lender responses. “The data on loans being declined is an historically high number. But many borrowers who are declined by one lender are meeting green lights from another. We are in changing times and both us and the borrowers have to adapt to new application regimes particularly when it comes to declaring and evidencing appropriate living expenses and expressing that to the bank. Never has it been more important to get individualised, experienced advice. And more than ever it’s time for borrowers to shop around.”
Anthony says caution from lenders has created uncertainty. “We are witnessing home-buyers taking more time to plan before they step into the market, doing more work looking at finance options. That’s a good thing, because the savings on rates and fees can be substantial.”
Ironically the Haynes recommendations to clip the mortgage broking industry, now officially being ignored by both major political parties, could have really created havoc in this lending environment. It’s a time when home buyers and investors need to ensure their chosen lender is a good fit for their personal borrowing position.
Anthony says wise investors are building equity with more than one bank to ensure they have more options. “Loyalty is long dead in banking. Investors with more than one property are much better placed to negotiate and save if their lender knows they have loans with another bank. Many borrowers still think they need their everyday bank accounts to be duplicated to do this, but that’s not the case.”
Where do you think Brisbane’s property market will go in 2019? Please take 2 minutes to do our quick survey (and for every response by March 8th we’ll donate $1 to the Vinnies North Queensland Floods Appeal)