ARE MORTGAGES ABOUT TO RAMP UP AGAIN?

ARE MORTGAGES ABOUT TO RAMP UP AGAIN?
Written by: Robert and Russell Markham

With the lowest interest rates on record, along with a multitude of lenders offering better and better deals, it is of no surprise that mortgages are on the rise again. Investors have gotten over their fears of the Coronavirus with regards to the property market. It appears to be full steam ahead on borrowing again.

One of the key drivers behind the willingness to take on a mortgage has been the incredibly low mortgage rates on offer. For example, https://www.finder.com.au/home-loans shows some of the mortgages in the marketplace for Australia. Just browsing through the different loans, I came across a 30-year loan by Macquarie where for the first 3 years the loan is fixed at 2.09%! And there are loans cheaper than that at sub 2%. A few years back, a 3-year fixed mortgage would have cost you around 6% or more. How times have changed.

Combine this with the work from home narrative playing out globally, and you can see why there is the growing demand for bigger properties outside of the major regional centres. If I can work from home, why do I need to live in a big city…why not move out to the suburbs and get a much nicer house at half the price? All good until such time that one needs to return to the office. Or is this the beginning of a new way we do business, where working remotely will become the norm, and, as such, owner occupiers will continue to move out of the cities into more affordable housing in the regions? Not just the owner occupiers, but the renters…those who could not afford the price tags in the major cities are now seeking their slice of the property market in more affordable locations thanks to the work from home possibilities.

With such changes…the big benefactors have been those in real estate. New house sales mean new commissions and the associated mortgages. If any of you have applied for a mortgage in recent months, you most certainly have been told by your broker about the backlog of mortgage applications in the pipeline.

This got me thinking…who are the big lenders in Australia? The banks as we know, but then there are a whole lot of other companies out there who also offer mortgages. For this exercise, I am going to stick to some of the key lenders listed on the ASX. For this analysis, the VectorVest team has generated a new WatchList which will house all the key mortgage companies listed on the ASX called Home Loan Providers which you can find in Viewers, WatchList Viewer, Overview WatchList group.

The WatchList put together identified 18 listed mortgage providers. Most of the listed companies offer more than just mortgages. In the video, I will show you how I narrow the list down to just 4 companies that stand out to me. A few analysts are noting that lower interest rates will keep driving lower mortgage rates and in turn bring on more demand for mortgages – whether that be owner occupier or investor loans.

A bit more research into this confirmed that loans indeed are on the rise. I came across the statistics provided by the Australian Bureau of Statistics:
https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release

Some very telling statistics in there. Notice how owner occupier is up 38.9% year-over-year. Investor loans are up 10.9% year-over-year. There has been more of a drive for owner occupiers…which ties back to the narrative noted earlier, people moving out of the cities for a better work/life balance while working from home. Good times for mortgage companies!

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On a final note, keep a lookout for the invite to attend the VectorVest Australia Online Investment Club. The club takes place on the 4th Saturday of each month and runs from 9.15am (Melbourne Time) through to 11.30am. The next meeting is on the 27th of February. The replay videos will be sent out to the given email addresses that you provide to VectorVest per your preference settings. You can check these settings by clicking on Tools (per the top right of your screen in VectorVest 7) and then selecting: My Profile. From there, login using your VectorVest Username and Password. Then click on Email Preferences and set your preferences accordingly. A very handy feature in VectorVest!

Alternatively, per www.vectorvest.com.au you can now access a chat box that will pop up. And, as always, you can call the team on Australia Toll Free: 1 800 303 782 or email [email protected].