After two months devoid of interest rate increases, home loan customers are getting comfortable with the repayments that will become the new normal. Initial indicators of ‘mortgage stress’ are up as households spend on average more than one third of the pre-tax earnings on home loan repayments.
The value of new housing finance fell for the second month in a row with July recording a 1.2% drop after a 1.6% drop in June. These are still well below the 5.8% drop in February which seems to coincide with the drop and then slight recovery that has been observed in house prices.
Owner Occupier lender seems to have suffered the largest drops, with a 1.9% drop vs a very slight 0.1% increase in Investment lending. Previously published drops in construction approvals are also flowing through to the home loan market as construction finance has dropped by 5.7% in the month.
Home loan borrowers are continuing to shop around for a good deal. Refinance activity in general jumped by 5.4% and totalled more than $21.5 billion – a record high. This is reflected in competition between the banks as interest rate pressures start to heat up now that cash-backs and other incentives have finished.
Banks and lenders continue to evolve their strategies, with a distinct shift towards retention of existing clients already on the book. Now is the time to look for a bargain in your own backyard – often the first step in getting a better rate is asking the question.
Platinum Investments (NSW) Pty Ltd and Trimac Holdings Pty Ltd, trading as PT Wealth ABN 16 698 445 925 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523.
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