Mortage Brokers - your thoughts of current market ?

Discussion in 'Property Market Economics' started by See Change, 1st Sep, 2020.

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  1. See Change

    See Change Well-Known Member

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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I haven't had one existing client affected. I've had a few new clients come along who have had drops in income due to the industries they are it. No one is selling because they are fearful of reduced prices, but a lot are refinancing and still many are buying too as they think they are getting good deals.

    Overall my business is booming.
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Most of the people I talk to are doing fine. A few have lost their jobs, but most are working from home. Many are in some sort of essential service and are working harder than ever. Some people are working in a reduced capacity, a few on Jobkeeper.

    In fairness, I don't have a lot of clients in industries such as hospitality, retail or tourism. From my perspective, the average property investor is in a trade or a uni educated professional.

    There doesn't appear to be much talk of selling overall. I've seen a few clients pick up some good deals, but at this point there's not really any distressed sales. No doubt there will be a few to come in the next few months. I think it's going to be a case of opportunities here and there, not a fire sale market.

    Overall there's fewer people purchasing, but also fewer properties available to purchase. It's kind of creating its own balance in Melbourne. Plenty of people thinking about buying, but mostly refinance happening right now.

    The most consistent stress point I've been hearing about is home schooling, not household finances. Apparently Little Johnny's teacher is a liar, Little Johnny is not a pleasure to teach!
     
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  4. Lindsay_W

    Lindsay_W Well-Known Member

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    I've had a mix of clients buying without giving a thought to it and some that were keen to buy but are now holding off until next year, based on the assumption that there is going to be a dip at some point in 2021.
    More buyers than 'waiters' though probably an 80/20 split not including clients which are refinancing, which is making up the majority of my business currently.
    Fortunately haven't had any that are needing to sell, this may change over the next 6 months.
     
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  5. albanga

    albanga Well-Known Member

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    @See Change i swear this morning I was going to create this exact thread! Great minds think alike.

    Im so tired of seeing the same headline grabbing no substance pessimist articles shared on these forums.

    Very refreshing to get insight from actual real people and wouldn’t you know it business as usual or booming. I have a few MB friends and never been busier. Big increase in FHB activity as well......I’ll just wait patiently for someone to share some pessimistic affordability news article written by Kenny who got his economics qualification from a cornflakes box.
     
  6. euro73

    euro73 Well-Known Member Business Member

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    APRA's major bank data released today indicates that O/occ refinances and first home buyers are where the majority of activity is occurring . INV volumes are somewhere between blah and slightly receding...

    FHLDS is driving some of it - FHLDS grants four-year head start to FHBs

    Musical chair refinancing between majors is driving most of it - in the months to June, NAB and WBC /STG/BOM /BSA were seeing book growth..... CBA and ANZ were not. Since June, NAB and WBC/STG/BOM/BSA have seen a dip in volumes ( mostly investment lending rolling of their books) and CBA and ANZ have been seeing growth... but it's not INV growth - all of CBA's growth has been O/Occ according to this article and 78% of ANZ's growth was O/occ driven.
    So the INV business rolling off NAB and WBC/STG/BOM/BSA must be going elsewhere or possibly its just evidence of investors selling up/exiting stage left? Brokers will know that some of this is a result of all the cashback offers, driving people to refinance between lenders ...and it's also probably a result of the attrocious turn around times that had crippled NAB and WBC over the first half of the year. But ANZ are shocking now, and NAB have reasonably quick SLA's again, so maybe the next data will show more musical chairs out of ANZ and back to NAB??? Overall though, no material credit growth happening, and what little growth is occurring is made up of either "churn" / refinance of O/Occ loans and some new business from O/Occ FHB.... and that modest O/Occ growth is being balanced by some modest INV roll off...

    Big 4 diverge following COVID-induced lending boost

    To me... this demonstrates very clearly that the rate cuts , the RBA bond purchasing that is driving the 1-3 year fixed rate markets and the associated servicing calc improvements the lower rates have brought, and the cashback offers - have created a sugar hit for O/Occ borrowers ( established and first timers) which is driving the majority of activity .... but not much has changed for INV borrowers ; Aside from the improvements to holding power that lower rates have created (allowing the P&I cliff to be avoided/ deferred) there is zero evidence investors have re-entered in any volume whatsoever, at this stage.

    So once all the refinances have been completed, and all the FHB's have been brought forward.... and all that's left is investors with exhausted borrowing capacity ( but improved holding capacity) where do the next buyers/credit growth come from to drive prices?

    40 year loan terms and actuals are going to be needed :)
     
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  7. Illusivedreams

    Illusivedreams Well-Known Member

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    If the government was to be be able to create inflationary policy how would this affect credit?
    It would be hard to do in current climate but in abstract.
     
  8. MC1

    MC1 Well-Known Member

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    I have definitely seen a drop off in purchases in Melbourne. Refinancing going ok.
    Speaking to a couple of managers at big 4, they say most business is coming from Refi's.
    This is dedicated to Melbourne
     
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  9. See Change

    See Change Well-Known Member

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    One observation I have is from a recently retired pilot ( good timing ...) . A couple of his friends are now on job keeper with large mortgages and are thinking of selling now while the market is ok . Given the uncertainty in their business , they are thinking of playing it safe .

    We're thinking of selling a couple of properties in our super ( their markets seem ok at the moment ) so we're cashed up to look for other opportunities that are more suited to long term B&H.

    Cliff
     
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  10. euro73

    euro73 Well-Known Member Business Member

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    Credit of itself isn't an issue... there isn't any shortage of money available... people's ability to borrow and willingness to borrow is what may be less plentiful. If Govt delivered policy aimed at creating inflation ( I assume you mean wage inflation ? as it is required first in order for all other inflation to follow) in order to create confidence and spending, I would imagine the RBA would eventually need to raise the cash rate.... it would push up assessment rates and cancel out any additional borrowing capacity created by wage inflation. After all, DTI ratio's are still DTI ratio's

    I would also point out, if it was within this particular Governments capacity to do such a thing - ie deliver inflation - I think they'd have done so at some time in the last X number of years ... but they have shown no capacity whatsoever to do so.
     
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  11. craigc

    craigc Well-Known Member

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    Agreed - on the other side of the fence, various banks are currently actively reducing deposit rates they are offering in the wholesale short term market from their trading desks as there is simply‘too much cash’.

    Will be interesting to see where these funds end up going to at some point.
     
  12. Morgs

    Morgs Well-Known Member Business Member

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    From my point of view.... the vast majority of people I'm finding they're unaffected by things. If anything I'm finding that COVID has made people re-evaluate things be that:
    • Huge glut of refinances for around 3 months from March with people having more time to focus on things they wouldn't normally like mortgages & refinancing (plus many pulling out equity to spend on improving the home)
    • Remote working opening up relocation opportunities for many out of central city locations into outer lifestyle suburbs & lots of people opting for the big owner occupied upgrade.
    • Fair few investors gearing up to capitalise on buying opportunities (but the market has somewhat resilient in many segments)
    • Lots of FHB coming into the market via FHLDS and added incentives
    I've only had a handful of clients affected who are in certain industries (aviation as an e.g.) but with strong contingencies so they're going to be OK for the foreseeable future without needing to do anything drastic.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes it does seem that people have more time to think about things such as refinacing and investing now. I have also see heaps more people wanting to get their wills done. I don't think it is the fear of dying from the virus but just time to think about things they have been putting off for ages.
     
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  14. MTR

    MTR Well-Known Member

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    heard this before most coming from refinancing
     
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  15. MTR

    MTR Well-Known Member

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    I think euro73 is not pulling any punches here and spot on
    My MB saying the same. Not interested in what media says, but we dont wont to stick our head in the sand either.
    Love this thread..... the good, the bad and the ugly
     
  16. albanga

    albanga Well-Known Member

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    Great post!

    My answer to your last question though, there will ALWAYS be something. We just don’t know it yet.

    There are literally endless variables to make something a possibility. The amount of time I have read “yeah but that was because of XYZ and that will never happen again”....Sure it might not, but something else will.

    So rest assured whether it’s manufactured (credit access, policy changes, incentives, longer term loans or different products that didn’t even exist) or whether it’s organic (perhaps we strike gold and cause a gold rush :p )
     
  17. wombat777

    wombat777 Well-Known Member

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    Screen Shot 2020-09-07 at 3.36.17 pm.png
     
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  18. fl360

    fl360 Well-Known Member

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    @ Peter Sarmas,

    Few weeks ago I refinanced my PPOR, and got IP loan approval for 3X my PPOR loan amount now. I guess I will be in the statistics which quotes as investor / oo "activity".

    Having said that my searching activity and urge to buy has dropped because

    1. for PPOR there is nothing better than the one I am currently living in.
    2. for IP, I am not quite willing the take the risk to jump in at the current price levels, given we are in the current environment.

    the elephant in the room is RBA rate increase of say 1%, that's would bring loan rate from ~2% to ~3%, a 50% increase in interest cost... this may not happen in the next 12 mth, but eventually will happen.
     
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  19. Trainee

    Trainee Well-Known Member

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    When was the last time you thought it was worth taking the risk for you to buy an IP?

    Whenever someone says the market is too risky, it depends on their idea of risk. If someone's idea of risk means that they havent bought anything in the last 20 years, how good or useful is their current assessment of risk?
     
    Last edited: 7th Sep, 2020
  20. euro73

    euro73 Well-Known Member Business Member

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    Like I said... 40 year loan terms and a return to "actuals" would be needed. ;)

    I get it... people want to believe that the good times can roll on forever. That growth is assured. That gravity doesn't exist. That a correction cannot happen. That's everyone's prerogative , of course... just as it is my prerogative to believe that gravity cannot be suspended forever.

    Having seen many more servicing calc scenario's than the average bear, and running a business that does this stuff and nothing but this stuff all day every day, and seeing the same patterns over and over and over again in the overwhelming majority of scenario's .... ie people with equity and little to no ability to harvest it in a material way... and in some cases a real risk of holding costs bringing them undone if they don't use the low rates available right now to retire some extra debt and build buffers against P&I shock later on.... I have to accept that the odds of trouble are greater than the odds of no trouble. So the complacency here is worrying.

    I don't know whether a correction will happen, big small or otherwise.... but only a fool doesn't acknowledge that the current market is upside down because of deferments, jobkeeper , 0.25% cash rate etc..... only a fool doesn't understand these policies are suspending gravity in order to buy time .... but we all know that gravity is going to win that tug of war eventually.... The question is, will the suspension of gravity be enough to buy enough time to avoid serious trouble? None of us know. But the banks are now estimating crunch time to be mid 2021. That's about 3- 6 months after deferments are scheduled to start ending..... Are we really to believe that Governments and banks can suspend gravity forever ??? I think that's probably unlikely....but none of us have seen this before , so only time will tell.
     
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