Predictions for 2019’s mortgage market for property investors

Given softening property prices across Australia, mortgage brokers have been finding that buyers in the latter half of 2018 have been taking a careful approach to financing, and expect this to continue into 2019.

For some, like mortgage broker and Pink Finance owner Nicole Cannon, this signals a more educated market of property investors.

“I think the awareness is now out there to be mindful of product and structure, and ensure it meets your long-term goals,” Ms Cannon told Smart Property Investment.

“The awareness is out there about paying your debt down, and taking on only what you can manage, not just what you can get,” Ms Cannon added.

More competition

Despite the cautious investor market, brokers are also expecting a more competitive market in light of the banking regulator lifting its restrictions on interest-only loans.

“The positive impact will be the ability for existing interest-only mortgagors, specifically investors, to refinance to another interest only loan,” said broker and managing director of Sydney-based Atelier Wealth Aaron Christie-David.

Big names in banking also foresee a more competitive mortgage market in 2018 in light of APRA easing off on interest-only loans.

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.

The challenges

A challenge for investors will be in picking lenders which have the appetite to take on interest-only loans, given APRA has vowed to keep its eyes locked on lending practices.

“The challenge will be gauging lender’s appetites to take on more interest-only loans, knowing the heavy scrutiny these loans have attracted,” said Mr Christie-David.

Further, many lenders have upped their prices on interest-only loans, and may not relent moving into 2019.

“The banks increased their interest rates on IO and investor loans to slow down their flows when the cap came in,” said Marshall Condon, mortgage broker and director of Victoria-based brokerage Neue Black.

“Generally speaking, when the changes came in, the majority of the time it just wasn’t really palatable for clients to look at an interest-only loan because of the rate differential. I think the rate differential had more of an impact rather than the cap – but that was partly due to the banks taking advantage of that benchmark,” he said.

“I don’t think we’re going to see a spike in interest-only loans until that price differential disappears. It is my point of view that the removal of the cap therefore won’t have too much of an impact on people getting interest-only loans,” he said.