Hot housing market to carry momentum into new year

Hot housing market to carry momentum into new year

Cheap debt, government payments and a pandemic seemingly at bay are creating ripe conditions for a surging housing market in the years to come, industry experts say.

Home loan lending is up 25 per cent since the beginning of the year, according to the Australian Bureau of Statistics (ABS), and the banking industry is expecting the momentum from a bumper season to carry into next year.

“We’ve never experienced pent up demand like this,” James Symond said, chief executive of Aussie Home Loans, the largest mortgage broker in the country.

“The current conditions are creating the perfect storm of positive growth drivers, which will propel our property markets into 2021 and 2022.”

Aussie recorded its strongest month for home loan applications and settlements. About $1.6 billion in home loans were settled in October, leading the brokerage firm to forecast settlements of $18 billion in the financial year ending in 2021.

The standout performance follows settlements of 32,000 loans valued over $6 billion, since the beginning of the year till 30 September, despite the impact on business brought by the pandemic.

"Competitive interest rates and the Reserve Bank of Australia’s record-low cash rate to 0.1 per cent may have been triggers for the increasing rate of home loan applications,” Mr Symond said.

“I believe the comeback for the Australian property market has certainly begun. From a demand perspective – there is quite a shift in sentiment.”

Aussie’s home loan numbers are in keeping with the industry’s. ABS figures for September -- the most recent available -- revealed $22.5 billion in new loans were taken out, a monthly increase of 5.9 per cent.

The optimism has reached big banks. Commonwealth Bank, which owns Aussie Home Loans, recently revised its forecast on the economy. The bank’s chief economist anticipates the economy will grow by 4.2 per cent in 2021, eclipsing earlier projections by an additional 1.7 per cent.

What’s driving people to buy a home now?

Record low interest rates and government subsidies were helping spur the housing market along, including HomeBuilder and First Home Loan Deposit Scheme.

About half of the $17.3 billion spent on owner occupier loans in September were for the construction of new homes, the ABS said, while about 35 per cent of applications were filed by first home loan buyers.

“Owner occupier housing loan commitments are at historically high levels, consistent with low interest rates and government incentives,” Amanda Seneviratne said, head of finance and wealth at the ABS.

“For example, it is likely that the (government’s) Homebuilder grant is contributing to increased demand for construction loans.”

The housing industry association (HIA), which represents the residential home building, renovation and development industry, said new home sales were 31.6 per cent higher in the three months to October, when compared to the same period a year earlier.

“The detached housing market continues to perform strongly and as it accelerates will pull the rest of the Australian economy forward into 2021,” Tim Reardon said, chief economist at HIA.

“HomeBuilder was the catalyst for improving consumer confidence in the housing market.”

But the praised subsidy is coming to an end

The $680m government measure, which offers eligible people $25,000 if they’re spending from $150,000 to $750,000 on a renovation or new build, is estimated to support 27,000 building projects.

Households are diverting the money they would’ve spent on holidays and entertainment on their homes. Small scale renovations were up 25 per cent compared to the same period a year earlier.

The federal government’s HomeBuilder grant is scheduled to expire on 31 December. As of October, approximately 11,000 applications had been submitted.

“The statistics show HomeBuilder is achieving exactly what it was designed to do,” Michael Sukkar said, the minister for housing.

“It is igniting the construction industry and helping to protect jobs right across the sector.”

The government has not committed to extending the scheme.

“A scheme that’s working well, that’s supporting the industry … all of those factors go in favour of the program,” Mr Sukkar said.

“... We’re keeping a really close eye on it and we’ll make a call as that date (31 December) gets closer.”


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Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

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Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

While bank staff recommend home loan products only from their own employer, brokers are independent, so they can recommend products from a range of institutions.

Brokers need to be accredited with a particular lender to be able to work with that lender. A typical broker will be accredited with anywhere from 10 to 30 lenders – the big four banks, as well as a range of smaller banks, credit unions and non-bank lenders.

As a general rule, brokers don’t charge consumers for their services; instead, they receive commissions from lenders whenever they place a borrower with that institution.

How much are repayments on a $250K mortgage?

The exact repayment amount for a $250,000 mortgage will be determined by several factors including your deposit size, interest rate and the type of loan. It is best to use a mortgage calculator to determine your actual repayment size.

For example, the monthly repayments on a $250,000 loan with a 5 per cent interest rate over 30 years will be $1342. For a loan of $300,000 on the same rate and loan term, the monthly repayments will be $1610 and for a $500,000 loan, the monthly repayments will be $2684.

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Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

What is a valuation and valuation fee?

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What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

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Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

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