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Recent cuts to the official cash rate has produced a wave of confidence in the housing market. The Adviser asked the broking industry how they think this will impact on home lending moving forward.
When asked about the impact of recent interest rate cuts on home lending, industry professionals unanimously saw an influx of first home buyers (FHBs) utilise their services and access the market.
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Combined with confidence instilled by the result of the federal election in May, industry professionals have seen the effects.
Janine Leafe, a mortgage broker at Imperius Finance, said she believes that the consumers most likely to benefit from interest rate cuts are current mortgagors and FHBs.
“I do not see a significant rush to purchase property, especially for existing and seasoned home owners, as they are wary of further correction, especially in the eastern market,” Ms Leafe said.
“Where I see most potential will be in the refinance, consolidation and first home owner segments of the market.”
Ms Leafe stated that she thinks Western Australia is due to see the biggest influx of FHBs in light of lower interest rates and relaxed lending and serviceability requirements.
“These, coupled with the fact that the state is lingering at the bottom end of the market after a decade, allow for low-risk entry into the housing market,” she said.
Loan Market broker Nicola Tucker believes the RBA rate cuts are going to “boost consumer confidence”, having already noticed the shift in sentiment among her client base.
“I have started to notice that we’re chatting to more consumers, especially first home buyers,” Ms Tucker said.
She stated the cuts will significantly improve affordability for consumers that already have mortgages.
“They can refinance and repay their loans quicker,” she said. “It also improves their capacity to spend, which has flow-on effects to the rest of the economy.”
Ian Miller, founder of Full House Finances, said rate cuts will “instill more confidence in the market”, and coupled with the election results, these factors “will probably get more people to take the step and buy”.
He added: “While people are in a better position in terms of having the ability to borrow, there are still lending restrictions in place that could offset some of that capacity.
“I think as soon as APRA’s changes to stress-testing limits filter through, coupled with possibly another RBA rate cut, it will open the gates to more lending,” he said.
Principal of Connective and MFAA board member Mark Haron agreed that a significant impact of the rate cuts will be current mortgagors looking to get a better deal, while pushing more new buyers into the market.
“This will create opportunities for brokers to talk to customers about the best possible loan and rate for their current situation,” Mr Haron said.
He expressed a similar sentiment to Mr Miller when he noted: “While the rate cuts will be important to the stimulation of refinancing activity and increased interest from home buyers and upgraders, APRA’s change to the serviceability rate will have a much more significant impact on the economy than the interest rate cut by the Reserve Bank.”
[Related: Interest rate analysis reveals state of play in mortgage market]
