With home finance lending heading up (2.5% in December – seasonally adjusted) and competition alive and well between the big lenders, Westpac’s announcement of a new 85% non mortgage insured loan shows the fight is back on for new clients; and it’s all good news for property investors.
Finance approvals are a leading indicator of the housing market, the increase in lending volumes is reflective of a growing confidence in the property market and has historically led to a growth in home values. With several interest rate rises last year on the back of a tight finance market (especially for investors) with lower loan to value ratios, tighter conditions and low confidence from Valuers, many investors found it challenging to say the least. Where an investor once had the equity and serviceability to purchase multiple properties, some found it difficult to be able to finance a single investment property.
This week Westpac Bank have announced a campaign with a new product that shows the climate is changing and competition is returning to the lending market. They are now offering an 85% loan that comes with some reduced fees and reduced interest rates yet no mortgage insurance. While 5% might not sound like a big deal its around $23,000 an investor doesn’t have to find from equity or savings to purchase an investment property. The additional benefits mean their cash flow will also be better. This can make a significant change to an investor’s capacity to build their portfolio.
What it also reflects is the confidence of the banks in the strength of the Australian housing market as a sound asset and their willingness to increase their levels of exposure to residential property. After the last two years of very tight lending criteria it also means that those who haven’t been able to purchase property are in a position to do so and as more people return to the property market history tells us the cycle enters the ‘upswing’ phase.
All of this is in line with many other drivers of the property market including the effects of the economic environment and population changes. With the Australian and now global economies heating up, steady house prices, wage price growth and population increase on the rise, the addition of easier finance means we are primed for the property market to improve.
The banks are counting on it and taking action, they see the opportunity – what about you?