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Mortgage Stability Attracting New Buyers

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Taking on a new mortgage is becoming an increasingly attractive option for Australians as mortgage stability hits a near-record high.

Around 3 million people were expected to buy a new home in the next six months, while more than 256,000 refinanced, according to a number of reports.

Australia’s ability to keep up with these mortgage repayments was continuing to improve despite property prices skyrocketing.

One-in-six mortgagors said they were considered at risk of mortgage stress in the three months to May, compared to nearly one-in-five at the same time last year.

The data from Roy Morgan revealed low community transmission and increased full-time employment were contributing to improved conditions.

Meanwhile, property prices nationally have increased by more than 10 per cent in the first half of the year, according to the Reserve Bank of Australia, who decided to maintain the cash rate this week.

“Demand over the preceding year had been led by owner-occupiers, although investors had become more active in recent months,” the board said.

“As had been the case for some time, the flow of new listings for sale remained similar to pre-pandemic levels but total listings were much lower, implying that dwellings were being sold at a rapid pace.”

Low interest rates and new buyers could further boost the property prices with three million people looking to buy in the next six months, according to Finder.

The research revealed 7 per cent of Australians were looking to buy as an investment, while 7 per cent plan to live in the home they buy.

A further 10 per cent of people would buy a property in the next six months if they could afford to do so.

However, rents were also on the rise increasing between 8.9 and 21.6 per cent across Australia with the exception of Melbourne and Sydney where there was little change.

Mortgage stress hits near record low

Mortgage Stability graph from Roy Morgan May 2021

^Source: Roy Morgan

Roy Morgan chief executive Michele Levine said support from the government and banks was helping people continue to service their mortgages.

“Many years of research into mortgage stress has shown that the biggest driver of increased mortgage stress is the reduction in income caused by the loss of a job which causes an immediate jump into a ‘risk’ category,” Levine said.

“Over two-in-three mortgages rely on more than one income and our analysis shows losing even the lower of these two incomes causes an immediate four-fold increase in the likelihood of those mortgage holders becoming ‘at risk’ or ‘extremely at risk’.”

Refinancing is also on the up with more than 256,000 refinance settlements occurring across the 2020-21 financial year, according to PEXA.

PEXA senior research manager Mike Gill said mortgage holders were taking advantage of the low interest rates.

“We witnessed a significant spike in refinances in June 2020 following the Reserve Bank of Australia’s rare double rate cut in March of that year,” Gill said.

“We have seen elevated levels of refinancing activity since then across all eastern states.

“The recent records set in June 2021 within NSW and Queensland coincide with public commentary of a potential interest rate rise sooner than previously forecast by the Reserve Bank.”

The report found refinance activity in NSW had the steepest rise, up 15 per cent year-on-year to over 101,000, while Queensland volumes also increased by 12 per cent year-on-year, with more than 48,000 refinances settled.

Victoria recorded the most refinances of any other state with more than 106,000, just surpassing its northern neighbour, however witnessed lower year-on-year growth, under 4 per cent.

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Article originally posted at: https://www.theurbandeveloper.com/articles/mortgage-stability-attracts-new-buyers