Property prices are surging – but what does that mean for home loans?

It’s been called a ‘once in a generation property boom’, with respected experts and big four bank economists all lining up to forecast double-digit gains for Australia’s property markets over the next two years.

Then, CoreLogic released its February home value index. And, with prices rising at their fastest pace in 17 years, it’s clear momentum is building faster than anyone expected:

In Sydney, the median home value jumped by 2.5% month-on-month to hit $895,933.

That’s a rise of $21,850 over the month … or $780 a day. 

Auction results are through the roof too, with the Sydney region’s February clearance rate topping 87%. And, unlike the last boom in 2015-2017, it’s not just Sydney or Melbourne seeing property prices skyrocket this time.

Almost everywhere is – be that regional or metro.

Take the other capital cities, for example.

Darwin, Adelaide, Canberra and Hobart all saw values accelerate by more than 3% in the last quarter of 2020, while Perth is tipped to end the year as the nation’s strongest performing market.  

Buyers are rushing to buy property before prices spike further. So how does this increasingly competitive environment impact lending?

Slow turnaround times and ‘system scored’ approvals

The most recent Australian Bureau of Statistics data shows over 27,000 new mortgages were taken out in January – with the value of new lending commitments hitting an all-time high.

On top of that, over $15.6 billion worth of home loans were refinanced in the month, as Australians increasingly look to save money on their mortgages.   

All of which adds up to a significant volume of applications.

But high volumes mean longer turnaround times, with many lenders experiencing worsening delays.

How does this impact you?

Well, for starters, it’s now critical your application is submitted perfectly – with all relevant supporting documents present and correct. If not, you’ll find your application placed at the back of the queue, resulting in an even longer delay.

Under pressure, some lenders are no longer prioritising pre-approval applications. Instead, you’ll be given a ‘system scored’ approval – which means an actual human hasn’t yet cast their eye over the deal.

This could be extremely risky if you’re intending to buy at auction. You will be legally obliged to proceed with the purchase if you’re the highest bidder, even if your finance subsequently falls through when the lender takes a long hard look at your application.

How a good broker can help

When you’re looking for a mortgage, you don’t just have to find the right home loan from the hundreds of products in the market.

You also need to get your head around all the different lenders’ eligibility requirements, as rejections can damage your credit score.

A good mortgage broker takes the hassle and stress out of the process by finding you the best possible deal from the lenders you qualify with. They’ll then negotiate extra discounts, before structuring your application in such a way to ensure the fastest possible approval.

And, if you want to bid with confidence in an auction, a good broker can make sure your application is fully assessed by a person, not a computer.

At Eventus Financial, we understand the critical importance of submitting your home loan application in the best possible way. So we keep up-to-date with lenders regularly changing credit policies and, as a result, have one of the highest quality scored submissions around.  

Schedule a no-obligation consultation with Alex to find out how we can help you with your home loan.