7/10 brokers unconvinced buffer changes will cool housing market

After surveying over 100 mortgage brokers across three weeks in October, the survey found that over 70 per cent of respondents predict that housing prices will continue to rise despite the implementation of an increased interest rate buffer. 

The regulatory body announced its decision to tighten lending standards early last month (6 October), telling banks it expected them to increase the minimum interest rate buffer for home loan serviceability from 2.5 per cent to 3.0 per cent. 

This change came into effect earlier this week (1 November). 

APRA’s decision came following “growing financial stability risks” from banks’ residential mortgage lending in the wake of escalating home buyer activity, rising housing prices, and, subsequently, mortgage lending. 

In September, figures relating to the June quarter revealed that over 20 per cent of authorised deposit-taking institutions’ new lending was to those who borrowed more than six times their pre-tax income.

Further reports and indexes published late last month, including one from Westpac and another from Moody’s, support this notion, highlighting how housing markets throughout the country are becoming increasingly unaffordable. 

Other reports regarding unaffordability, including one from Bluestone, have also stated that they forecast the number of macroprudential measures introduced by APRA will increase over time.

According to the Hashching survey, this expectation is shared among brokers, as 73 per cent of respondents stated that they believe more measures will be introduced over the next six months. 

An additional 58 per cent reported that they have noticed an increase in borrowers considering properties located some distance from where they’re currently based.

Speaking of the survey, Hashching chief executive Arun Maharaj said that the findings were no surprise, and that “a 5 per cent reduction in borrowing capacity doesn’t seem much compared to the hottest property market in living memory which is being fuelled by years of increased savings through the pandemic”. 

“As an industry, we’re collectively looking for what comes next from the regulator, which only time will tell,” Mr Maharaj said.

Mr Maharaj added that, according to Hashching mortgage brokers, first home buyers aren’t just “shifting expectations despite the runaway increase in prices”, with 64.7 per cent of the cohort being “mostly interested in freestanding homes” – a decline from last month’s 67.44 per cent. 

“There’s probably a big psychological hurdle here at play – compromising on your ideal after years of saving for a deposit will be tough, many will choose to just save more or will look further afield to get what they want,” Mr Maharaj said.

Find out more about regional Australia and its place in the great Australian dream in the October issue of The Adviser, out now.

[Related: The Great Australian Dream]