A good starting point during this analysis is to determine the accuracy of the most recent positive media stories around the property industry. We saw months of vastly exaggerated horror stories within the media by the so called ‘property experts’, who have now, very conveniently, not answered for such inaccurate readings. This in turn caused many potential purchases to hold back when they had a great opportunity to get their foot in the door. The marketplace itself cannot lie, so consumers need to pay attention to their local areas and the agents within, as they will provide the best first-hand advice.
The biggest issue we still face is very much the responsible lending criteria, which isn’t allowing those who are ready to purchase to get their foot in the door. This is due to the overly strict requirements that block a customer from borrowing based at the current interest rate and are instead qualified based on an interest rate that’s 2-3% higher. This is seeing an individual qualify for a higher loan amount based off their income but being lent an amount based off a higher rate, limiting their borrowing power due to poor risk assessment and de-personalisation of the process. In essence, the best interest of the customer is non-existent.
Just a few weeks ago, we saw numerous reports on how this lending criteria will include extra policies from major banks, inclusive of Westpac and NAB deemed by consumers to be very conservative. I couldn’t agree more. Some of these tightened polices include more detailed evaluation of expenses spanning anywhere from 6-18 months prior to enquiry, changes to the definition of a financial dependant, stricter debt-to-income ratio applied to all applications and an increase in expense categories from 6 -13. These stricter policies are said to be implemented to ‘better understand a consumer’s financial situation’ when in reality an adequate risk assessment is extremely circumstantial and all factors inclusive of environmental judgment, care and customer history should be taken into consideration.
I discuss these matters with my own staff regularly. Many of them are currently renting in their homes with their families and unsurprisingly most are spending the same amount on their rent as what they would be on mortgage repayments for a home of similar value. This cycle has created an industry of buyers ready to step into a now stable and accessible market road blocked by stringent lending criteria.
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