The property market always faces a lull as we head into a Federal election as confidence wanes and policy promises are thrown around. Now that the election has been decided, there have been several fantastic announcements that will benefit buyers and boost the property market.
1. APRA to scrap the assessment rate of 7%
Currently, lenders have to assess whether a borrower can afford their repayments using a minimum interest rate of at least 7%. This was a rule introduced by the Australian Prudential Regulation Authority (APRA) in December 2014 as part of its efforts to reinforce sound residential lending standards. This meant that regardless of the cash rate or standard variable rate at the time of applying for a loan, banks would assess a borrower’s ability to repay a loan at a mortgage rate of at least 7%.
To ensure lending stays prudent, APRA will require banks to assess a borrower’s serviceability at 2.5% above a mortgage product rate but this will be significantly lower than 7%. This is big news for buyers because it could potentially increase the maximum amount people can borrow.
2. Interest rate cuts highly likely
Only hours after APRA announced their change, the Australian property market was given a further shot in the arm when the Reserve Bank of Australia (RBA) governor Philip Lowe revealed that another rate cut looked highly likely, confirming it would be on the bank’s agenda next month.
Domain analysts confirmed that APRA’s scrapping of the 7 per cent ‘stress test’ buffer on home loans would, in effect, see a 9% increase in borrowing capacity for owner-occupiers, which would rise to between 13-14% if the RBA undertakes two interest rate cuts before the end of the year.
3. North Shore auction clearance rates reach 86%
There’s good news for buyers and sellers on the North Shore with the auction clearance rate reaching a high of 86.36%, which was also Sydney’s best for the weekend of the 12/13th May. This was well above the Sydney average of 67.05% and shows growing confidence from buyers.
4. First Home Buyer deposit guarantee
One of the last promises from the coalition before the election was the proposed $500 million scheme that will see eligible first-home buyers, with at least a 5% deposit for a home, qualify for a loan. They’ll also save around $10,000 by not having to pay mortgage insurance to lenders under the scheme. The scheme would be capped at 10,000 loans per year.
The scheme will ultimately be determined by the number of loans approved by the lenders and the arrangements with the National Housing Finance and Investment Corporation, which will act as guarantor on the loans.
Movements in the volume of mortgage lending is one of the leading indicators of house price movements. Therefore, a pick up in mortgage lending, enabled by eased assessment criteria, reduced interest rates and benefits for first home buyers could point to property prices stabilising, or even increasing earlier than anticipated, giving benefits and opportunities for both buyers and sellers.
If you’re in the market to buy a new home or investment property, view all our properties for sale.
If you’re considering selling, now is a fantastic time to get your property on the market with stock levels low and buyer confidence growing. Contact our sales team for more information by calling 02 8030 2552 or emailing salesnorthshore@savills.com.au