Trending Financial News 7 November

More Aussies are looking into a new mortgage …

The number of Australians making enquiries about applying for a new mortgage has increased for the first time since June 2017, according to new data from credit reference agency Equifax. Mortgage enquiries were up 2 per cent int eh three months to the end of September.

Mortgage enquiries were up 4.5 per cent in Victoria, 3.5 per cent in New South Wales and 0.7 per cent in the Australian Capital Territory. Other states and territories did not experience a growth in enquiries.

Equifax’s Moses Samaha said the rise in enquiries is good news.

“It is positive news for mortgage applications across all states and territories, with NSW, ACT and Victoria leading the charge.

“The other states and territories remained in the negative, but with significant improvements on the previous quarter.” 

Westpac makes property investing easier

Westpac has announced big changes to the formula used to determine the household expenses of property investors applying for home loans.

Previously, loan applicants who reported lower living and property management expenses than those implied in the HEM benchmark have been assessed using the higher HEM living costs formula.

Westpac said an immediate impact of the change would be to increase the borrowing capacity of investors who already own an investment property.

“In particular, a customer with an investment property or looking at purchasing an investment property who is currently reliant on HEM (that is the customer’s declared expenses are less than total HEM expenses).”

RBA announces ‘a gentle turning point’

The Reserve Bank of Australia has kept the official Australian cash rate on hold at 0.75 per cent for November. Yesterday, the governor of the Reserve Bank Dr Philip Lowe said:

“A gentle turning point appears to have been reached.

“The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter outlook for the resources sector should all support growth.”

Personal credit market under pressure

Australians are borrowing less using credit cards, personal loans and car loans. The personal credit market is contracting. The Reserve Bank of Australia reported that personal credit balances fell by 0.7 per cent in September 2019 and by 4.4 per cent over the 12 months to September.

The annual decline in personal credit balances is the biggest decline since the GFC in 2009.

Credit reporting company Equifax reported consumer credit applications were down 9.8 per cent compared with same time last year.

Credit card applications were down 12.4 per cent and personal loan applications were down 7.8 per cent.

Equifax’s executive general manager, customer and solutions, Moses Samaha, said car loan applications had declined along with falling car sales but other personal loan inquiries were steady. [chart from BankingDay.com]

Compare personal loans, car loans and credit cards at InfoChoice.

Westpac loosens borrowing rules

Westpac CEO Brian Hartzer said the bank had tightened its loan assessment criteria too much and was now focussed on making borrowing easier. Westpac lost home loan market share in the 12 months to September and Brian Hartzer said this was the bank’s own fault.

“Some of it has been self-inflicted through the changes that we put through on the expense categorisation.”

Mr Hartzer said the expense tool was now fixed.

“We're seeing the application volumes increase again.”

Westpac continues to woo investors

Westpac CEO Brian Hartzer said the bank wants to lend more to investors and has loosened the expenses formula for loan applicants.

In October, Westpac raised the loan to value ratio ceiling on interest-only loans for investors from 80 to 90 per cent.

In August Westpac introduced rate discounts for borrowers taking out loans with LVRs below 70 per cent along with a range of other changes to loosen loan application criteria.

How many Australians use Buy Now, Pay Later?

Almost 2 million Australians are now signed up to a Buy Now, Pay Later service.

According to Roy Morgan Research, 1.95 million Australians used a buy now pay later service in the last 12 months, up from 1.38 million the previous year.

More than half (55.9%) of buy now pay later users are aged under 35. 52 per cent of Australians say they know about buy now, pay later services.

Afterpay is currently used by 8.4 per cent of Australians over 14 years old with Zip currently used by 2.8 per cent.

All signs point to property market recovery

New detached house approvals rose 2.7 per cent in September and new apartment and unit approvals rose 16 per cent, according to data released by Master Builders Australia.

“Momentum in Australia’s housing market appears to be growing,” said Shane Garrett, MBA Chief Economist.

“House prices, lending and now building approvals all indicate that Australia’s housing market recovery is gaining traction.”

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