Borrowing Capacity Index – February 2023
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Loanscape has today released its Borrowing Capacity Index for Q3/2023. It shows that the borrowing capacities of Australian individuals and families continue to decline.
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Measuring Borrowing Capacity – A New Index
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Loanscape has created a new index which is a direct measure of the changes to borrowing capacity for prospective home buyers. Known as the Loanscape Borrowing Capacity Index it is an expression of the relative change in borrowing capacity for singles and couples among a basket of lenders.
Read MoreLooming loan restrictions could mean a shift in property prices
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With demand greatly outweighing supply, houses are selling well over reserve at auction and recent COVID-19 restrictions have affected property sellers’ willingness to go to market.
While this property boom strengthens some sectors of the economy, there are numerous economic implications. With houses skyrocketing in price, Australians yet to enter the market are seeing their chances of buying a property grow slimmer.
However, there is still high activity in the market for those with the capital to spare. But with higher prices comes higher property loans, as Australians are borrowing more in order to secure a property. Around 22% of all borrowers are now taking out loans that are six times larger than their annual income.
Read MoreLockdowns a knock to confidence
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Republished from MPA.
The nation’s lockdowns are taking their toll on new home lending and the financial comfort of Australians. While the RBA remains positive, there are still concerns about the economic recovery.
The value of new home lending in Australia dropped for the first time this year in June, coinciding with the start of Sydney’s lockdown. Declining 1.6% over the month, it was driven by a 2.5% drop in owner-occupier lending – the largest fall since May 2020.
Investment lending bucked the trend, with the value of new loans to investors growing for the eighth consecutive month, rising by 0.7% in June to reach $9.19bn.
First home buyer purchases and loans for construction slowed over the month as incentives were wound back.
Read MoreHow has buying property changed during the pandemic?
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The COVID-19 pandemic has forced the property market to adapt, from restricted open homes, online auctions, and the switch to digital communication over face-to-face. The recent Delta outbreak has resulted in further restrictions in NSW, with Greater Sydney under lockdown since the 26th of June. While restrictions are looking to lift with NSW approaching its vaccination target, there have been some major impacts on the process of buying a property that are expected to continue temporarily.
How have the recent COVID-19 restrictions impacted property buying?
The research process remains relatively unchanged. What has changed dramatically is the ability to thoroughly inspect a property and the shift from face-to-face to digital communication.
Communication with the agent
Due to the recent COVID outbreak and resulting restrictions, buyers must make contact with the real estate agent in advance of viewing an open home. Real estate agent Rosalie Gordon believes this has resulted in open homes being more exclusive.
“We are now screening the buyer before taking them through to open homes by asking what position they are in, whether finance is approved, if they are looking to buy property for investment or as a home, and whether they have already sold their current home.”
— Rosalie Gordon
Read MoreFirst Home Loan Deposit Scheme Update
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The federal government has recently announced that they will reissue unused guarantees from the 2019-2020 financial year from buyers who were unable to complete the purchase of their first home under the First Home Loan Deposit Scheme (FHLDS).
This opens up 1,800 opportunities for first home buyers to purchase a home under the scheme. Of the 27 participating lenders, so far NAB and Commonwealth Bank have announced that additional places will be available under them.
If you’re in the process of purchasing or building your first home, it’s a good idea to check whether you are eligible for the scheme.
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Loanscape has today released its Borrowing Capacity Index for Q4/2024. It confirms the forecast trend that borrowing capacities of Australian individuals and families are recovering from their low levels which coincided with the last of the recent increases to borrowing rates initiated by the Reserve Bank of Australia.