Exorbitant prices push potential buyers to borrow as much as possible

“[They’re saying] ‘We’re maxed out at the moment, we’re still looking, expecting there to be a plateau [in prices] but our concern is whether the rates go up? »

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“There are customers out there who want to borrow as much as they reasonably can in order to get into the market now, so they can buy where they want to buy.”

Equilibria Finance managing director Anthony Landahl still sees homebuyers looking to borrow as much as they can, in order to buy into a market where prices are still high despite a recent downturn.

“We always see buyers, especially homebuyers as opposed to investors, looking to get the urge to borrow the maximum amount they can, to give them the opportunity to get into the market,” he said. -he declares.

“There has been a net gain in price and people are still recalibrating where they can buy and what they can afford… Affordability is still an issue.”

For existing mortgage holders, many have taken advantage of the lowest rates in the past two years to make additional repayments and move forward on their loans, he said, while new borrowers are being assessed for more. ensure they can honor repayments once rates go up.

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The housing market has eased, but prices remain high.Credit:Flavio Brancaleone

These buffers are the focus of attention for the Reserve Bank, which noted some homeowners have managed to move ahead with their repayments, and stressed the importance of banks maintaining lending standards for new borrowers. A recent change by the banking regulator is forcing lenders to check whether buyers could meet their repayments if interest rates rise by 3 percentage points.

Axton Finance’s lead mortgage broker, Clinton Waters, sees second- and third-home buyers becoming more cautious about taking on too much debt before rates rise.

Their ability to earn income is approaching its peak and they may also have dependent children, he said.

But first-time home buyers often expect their income to grow over time and are more about taking risks.

Economists expect the Reserve Bank to raise interest rates in June. Credit:Louie Douvis

“First-time home buyers, they get so emotionally involved, they say, ‘We gotta stretch, we gotta get it,'” he said.

“What these young borrowers don’t always think about is what a single income household looks like.”

Sydney Mortgage Broker Director Michael Brown said almost all first-time homebuyers try to borrow as much as they can, but there has been a small shift for modernizers as the market relaxed.

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“We are able to go at a slightly more normal or sustainable pace in our home loan buying process in terms of preparing applications,” he said.

“Because there’s a little more time, they’re not under as much pressure and they’re making better decisions now, so they’re not necessarily going for the last dollar.”

But first-time buyers don’t usually have the luxury of borrowing just, say, $800,000 out of a capacity of $1.2 million, he said.

Even some self-imposed clients spent nearly a year looking for a home and eventually realized they had to borrow more to meet the market, he said, although this type of decision becomes less and less common.

“They come to understand that there are definitely going to be interest rate hikes and people have to deal with not just a small increase but potentially a significant increase,” he said.

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