Banks have a major impact on the property market. After all, most buyers and investors will need to take out a loan to purchase property. That’s typically the case regardless of whether they’re entering the market for the first time, upsizing to a bigger home, or adding to their portfolio.
For this reason, recent policy changes in the mortgage industry are now affecting the real estate market more broadly. Instigated by APRA and the ACCC, these reforms aim at curbing interest only lending, slowing price growth and limiting the amount of debt people can take on.
As a result, banks’ assessment criteria have had to change too. People can no longer access as much money quite as easily as they once could. Loan to income ratios are lower than they were, and the way banks assess outgoings - especially standard of living costs - have also become more firm.
These lending changes have affected all borrowers, but investor lending has been particularly hard hit. For investors, rental yields have been relatively flat, so interest rates have become even more important, with many looking to refinance their loans.
While the Reserve Bank’s official interest rates remain at all-time lows, banks are still free to set their own rates on the money they lend. Some have failed to pass on the full effect of rate cuts to consumers, while others have increased the interest rates on some products.
At the same time, there is more choice than ever in the mortgage market, with over 3,400 products now available to Australia's home buyers. It’s not simply the interest rate that varies between these. The qualifying criteria and quality of product offering also differs widely.
Mortgage brokers have become more important than ever in helping buyers navigate their way through the maze. It has become standard practice for buyers and sellers to check in with a broker when they’re making a property move (and even when they’re not) to see if their bank or another lender can offer a lower rate. Little wonder, when the savings in reducing a loan by a just a few basis points can often be considerable.
But despite the tighter lender criteria, first home owners are entering the property market in larger numbers than they have been for some time. We are encouraged that this trend will continue given government grants, historically low interest rates and the fact that banks are trying hard to attract their business.
Current market conditions also make it a good time to move up or down the ladder. Decreased pressure and market intensity give buyers and sellers more time to make a considered move. However, many should still receive a good price for their property when they do sell, especially in blue chip areas. And few areas can claim to be more blue chip than Sydney’s lower north shore.
We’ve compiled a free market snapshot you can download, to share with you some of the market trends we’ve been seeing in the Lower North Shore and Mosman area. If you’d like to know more about anything you read, please get in touch.