We welcome Simon Orbell, Mortgage & Finance Advisor and Director of Smartmove Mortgage Advisors as a Guest Editor to discuss the key reasons why the Northern Beaches market has remained resilient during this time.
1. The “assessment rate” of residential mortgages fell by almost 2%.
The “assessment rate” is used to determine borrowing capacity by sensitising a borrower’s existing, new home and investment loan repayments at a rate higher than the actual rate paid by the borrower. At one point lenders were using a rate of 7.25% to work out if a borrower could afford the repayments on a new loan despite actual interest rates being in the mid 3% range. This has now been amended by APRA which allows lenders to use a floor rate in the low to mid 5% range, or 2.5% above the actual rate. This was a huge shift in the marketplace that increased borrowing capacities overnight.
2. Four interest rate reductions in the last FY year.
When combined with the changes to assessment rates, the interest rate reductions have also increased borrowing capacities. However, this also meant that the cash outflow of existing mortgage holders has reduced significantly.
3. The full impact of Covid-19 on the residential mortgage market is yet to be seen.
We have seen lenders become more cautious and ask more questions. Despite this, they are still keen to lend money. It is also important for the banks to continue to lend to keep the country moving forward economically. Banks have been supportive over this difficult time.
These 3 key points are why the Northern Beaches property market has remained resilient in this time. The demographic makeup of the Northern Beaches property market is less affected than other areas of Sydney, NSW and Australia. Subject to a second wave and any Government stimulus being removed, significant price falls on the Northern Beaches do not appear likely. The fundamentals of why people want to live on the Northern Beaches hasn’t changed, and taking a long-term view, the Northern Beaches supply and demand equation is expected to play out in a favourable way for property owners.
Simon Orbell, Director of Smartmove Professional Mortgage Advisors, smartmove.com.au
If you have been impacted by Covid-19 and need assistance with your mortgage or lending situation, feel free to reach out by calling (02) 9968 5000 or emailing [email protected]. As always please seek professional advice before making financial decisions for your personal circumstance.