Australia’s property market is buzzing.
Home loan pre-approvals jumped 53%, year-over-year, since the Reserve Bank of Australia's (RBA)'s May rate reduction, according to Loan Market, the brokerage, which is part of aggregator Loan Market Group (LMG). And with the likelihood of more cuts on the way, the trend is set to turbocharge even further.
"They're very popular. And we certainly endorse them and encourage them, because the market is so competitive," Luke Ashby, a Queensland-based mortgage broker at Emerge Finance, told Australian Broker.
"If anyone has any ambitions to get into the market, you need to be ready to go and move quickly," said Ashby, who added that his firm is writing pre-approval applications daily. "With a client getting pre-approved, they can have sharp timelines with their finance condition, which obviously makes their offer look more competitive so they can secure that property."
The momentum followed the central bank’s rate cuts in February and May, sparking a wave of renewed buyer activity. By state, Victoria led the pack, with pre-approvals up 117% in May, compared with a year ago.
“The second cash rate cut was important in the eyes of borrowers," said David McQueen, chief executive officer of Loan Market. "It gives consumers confidence that rates are heading in the right direction, improving affordability.”
The Loan Market data backs the surge – but brokers are seeing it firsthand.
"The rate cuts increased people's borrowing capacity and people are trying to get in before prices continue to rise," Ashby said. "There's a little bit of a fear of missing out.
"I've spoken to a couple of buyers agents and real estate agents, and they're seeing an increase in numbers at open homes, obviously, depending on the different markets," he continued. "The townhouses and units are quite popular because that's within a more affordable price range."
This week, the RBA meets again to decide if they will continue easing monetary policy. At present, all of Australia's Big Four banks – Commonwealth Bank (CBA), Westpac, National Australia Bank (NAB) and ANZ – are all pricing in the likelihood of a third rate cut to come out of Tuesday's meeting. If the RBA pulls the trigger, the momentum is set to build even faster, keeping brokers, buyers and lenders on high alert.
In fact, in today’s fast-moving property markets, rising competition and lower borrowing costs make preapprovals a must for buyers and brokers looking to lock in a deal.
"In the market, there's so much competition," Ashby said. "You want to be pre approved so that you're ready to go right, so you can make those quick offers, sharp offers with the finance term, to be able to have your offer look the most attractive."
Refinancing activity has also picked up, adding to the overall surge in lending activity.
"Refinancing is big," said Darwin-based Janine Ashmore, founder and director of Bliss Home Loans. "People are looking to re-extend their loan terms to lower repayments; a lot of people are coming off those higher fixed rates.
"And I'm seeing a lot of upgraders," she said. "People who I would have done their first home loan 10 years ago. They're now keeping that as an investment and upgrading into something significantly more expensive. So they're really jumping into a whole other price bracket."
Ashby also noted that he has recently handled a significant number of refinancings.
"There's been a few fixed rates come off and all that sort of jazz. So people want to relook at options and see what's suitable," he said. "And there's a lot of people who are also looking to refinance, to access the equity that they built during COVID[-19], to buy their first investment property, or next investment property, or invest in shares, that sort of stuff.
"And there's a lot of people who can't afford to upgrade," Ashby continued. "Maybe they can't do a bridging loan, because they don't have enough equity. And with the subject of sale offer, it's very competitive. So they don't really get a look in. So what a lot of people are doing is refinancing, using the equity inside their home to upgrade their current house – whether that means building an extension, or redoing a bathroom or a kitchen, or any of that sort of stuff. We're seeing a lot of that.
"There's people on all different journeys and definitely increased activity," Ashby said."There's definitely brought more positivity into the market. And there's plenty of buyers out there and people looking to work out what their options are."
