Home loans demand to remain strong, says Aussie

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AFTER a year of restrictions stifling the market, pent-up demand and the current strong buying conditions seen in recent months are likely to carry over into 2021.

Aussie attributes this to high home loan pre-approvals, enquiries, applications and increasing affordability. This in addition to, historically low interest rates and government schemes such as HomeBuilder, the First Home Loan Deposit Scheme, as well as stamp duty concessions.

“Record low fixed rates and a quickly recovering property market are expected to fire up the home lending sector and economy in 2021,” said James Symond, CEO of Aussie.

“With interest rates remaining low and advertised housing stock likely to rise, we expect the number of dwelling sales to increase further in 2021, however the volume of sales isn’t likely to exceed the highs of 2015 due to the flattening of immigration numbers and restrictions on international travel,” said Symond.

Home loan volumes are forecasted to remain strong throughout 2021. With another positive sign being the record levels of building approvals in October and strong home loan settlement volumes.

“Borrowers are getting smarter as they know that interest rates will continue to remain low, with the average home loan size with Aussie growing from $377,934 to $402,293 in the 2021 financial year.”

Borrower confidence should also strengthen over the coming year, with lower COVID-19 infection rates, personal income tax cut, and unemployment levels not looking as dire as first expected.

“Buyers are rushing to take advantage of these conditions and are using mortgage brokers more than ever before, with 60% of all home loans provided by this fast-growing sector,” said Symond.

The low volume of stock in recent months has not only put upward pressure on dwelling prices but has created a sense of urgency in the buying market. Aussie reported an increase in broker appointments from last year, with 90,000 appoints being made in 2020, as well as a rise in pre-approvals.

“In particular, first home buyer enquires jumped up significantly this year – by almost 95 per cent – as they rushed in to take advantage of improved housing affordability, stamp duty exemptions in some states and potentially less competition with investors,” said Symond.

The proportion of fixed rate loans in the Aussie portfolio for owner occupiers and upgraders has reportedly almost doubled. Owner occupiers rising from 25.8% to 47.5% and upgraders from 44.3% to 65.3% for new customers this financial year.

“Not only are borrowers moving to fixed rates, they are also fixing for a longer period than traditional periods, with four and five year fixed terms making up the majority of fixed rate loans provided by Aussie in the past few months,” said Symond.

Increasing housing sales are likely to bolster the broader economy, providing a positive multiplier effect, as these transactions ramp up industry and state government revenues. With Symond predicting that positive activity in the property sector will lead the country’s economic recovery in the next year.