One of the country’s biggest mortgage brokers, AFG, expects Housing investors will continue returning to the market, helping to fill the gap left by retreating first home buyers.
After figures this week showed house prices surged again last month, the chief executive of wholesale broker AFG, David Bailey, said investors were making up a bigger share of its new lending and he expected the trend had further to run.
While banks have predicted the rapid growth in house prices will slow this year, Mr Bailey said he had not seen a softening in lending activity, which was being mainly driven by people upgrading to a new home.
“Coming through the other side of the pandemic … my view is that as first home buyers — particularly who look at apartments and smaller places and so forth — come out of the market, that volume will probably be replaced by investors,” he said.
The chairman of the Australian Prudential Regulation Authority (APRA), Wayne Byres, also said on Wednesday he expected investors would continue returning to the housing market.
Appearing before Senate estimates, Mr Byres said the fact owner-occupiers and first home buyers had driven the market until recently was a positive trend, but investor lending was now on the rise.
“Certainly the commitments to investors had been very low through 2020, but they’ve started to pick up again in recent months, so I think we’ll see them start to come back to the market,” Mr Byres said.
Lending to housing investors is being closely watched by regulators, who have warned banks not to cut their loan standards as low interest rates cause prices to surge. When APRA has put the brakes on previous housing booms by introducing credit restrictions, the measures were targeted at investors.
Mr Bailey said the share of AFG’s new lending going to property investors had risen from 21.3 per cent in the first quarter to 24.9 in the current quarter so far, but this was still well below its historical average of about 35 per cent.
Mr Bailey made the comment as AFG on Wednesday said it would take a 7 per cent stake in the neobank Volt for $15 million, and it announced Volt would supply some of AFG’s white-label loans. Volt also said its next chairman would be Graham Bradley, former chair of HSBC Australia and listed companies including Stockland and Graincorp.
In a further sign of investor activity lifting, the chief executive of mortgage broker Homeloanexperts.com.au Alan Hemmings said inquiries from investors were up by about 50 per cent compared with last year. He said this could be a response to some lenders cutting interest rates on investment loans.
“It may also be due to investors seeing opportunity in the market with the RBA continuing to state it will keep interest rates low for the foreseeable future and continued speculation of property price increases,” Mr Hemmings said.
The strengthening conditions in the housing market were also underlined by credit rating agency Standard & Poor’s, which said arrears rates for lower-risk borrowers had fallen to 0.94 per cent in March, down from 1.03 per cent a year earlier.
Director at S&P Global Ratings Erin Kitson said ultra-low interest rates, government stimulus, and a refinancing boom had allowed customers to build up financial buffers, and helped some struggling borrowers to move out of arrears.
“Given the low level overall, we are not expecting a big uptick in arrears as borrowers come off their mortgage deferral arrangements,” Ms Kitson said.
Ms Kitson said that in previous housing booms, the retreat of first home buyers had been followed by stronger lending to investors. She said investors were typically more able to access credit because they were likely to already own property, and had higher incomes.
Article Source: www.brisbanetimes.com.au
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