More price competition tipped for 2019 mortgage market

By Katarina Taurian

December 28 2018
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The regulator lifting its cap on interest-only loans has mortgage brokers confident in a more competitive 2019 market, after a year which saw big rate hikes investor loans.

apra australian prudential regulation authority price competition 2019 mortgage market

Budding and existing property investors tightened their purse strings in 2018, as the banking regulator’s restrictions on interest-only borrowing saw out-of-cycle rate rises, enforced expiration dates of interest-only loans, and lenders outright dropping interest-only loan offers for new customers.

By September, groups like the Property Investment Professionals of Australia were starting to worry. Its survey of 820 investors found 13 per cent of interest-only borrowers were expecting to “struggle” when they begin repaying principal and interest, with a further 13 per cent “unsure” and 61 per cent confident in their ability to meet repayments. Of those that said they would struggle to meet principal and interest repayments, 5.5 per cent said they have sold, or would have to sell, an investment property to meet loan commitments.

Earlier this month, the banking regulator APRA announced it would lift its cap on interest-only lending from January next year, which has made industry stakeholders and mortgage brokers alike more bullish about competition and price in the 12 months ahead.

Australian Banking Association CEO Anna Bligh said the decision “will mean all banks can offer more choice for customers who are looking to buy a house or apartment”.

“Increased competition across the industry will mean customers have more ability to shop around for the best deal for them when looking at an interest-only home loan,” she said.

2019 will likely see more flexibility for investors too, according to broker and managing director of Sydney-based Atelier Wealth Aaron Christie-David.

“The positive impact will be the ability for existing interest-only mortgagors, specifically investors, to refinance to another interest only loan,” he said.

Mortgage broker and owner of Pink Finance, Nicole Cannon, is similarly bullish about the choice and flexibility of the finance market in 2019, given the regulator has eased its conditions.

“This enables us to have more conversations with clients about the choices that they’ve got, and the options for them with their properties,” Ms Cannon said.

“The cap restricted how many lenders we could use, and some priced investment lending so that it’s not competitive. In some cases it’s almost just as cheap to do principal and interest as it is to do interest-only," she added.

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