The mortgage cliff v supply
After all the scare mongering and media hype about the mortgage cliff, we've arrived at what was forecast as the peak transition period, a three-month duration where the bulk of the sub 2% interest rate loans would expire.
The 'fixed-rate cliff' is a term used to describe the expiry of a significantly larger than average number of fixed-term loan facilities, which were secured between mid-2020 and mid-2022. Figure 1 shows the expansion of fixed rate lending early on in the pandemic, which peaked at 46% of secured housing finance in July and August of 2021, compared to pre-COVID levels of 15%. The majority of fixed rate loans were taken out with a term of three years or less, so the biggest number of facilities were expected to expire this year (880,000), followed by another 450,000 next year.
Has it hit?
ABS data suggests the majority of borrowers on low interest rates switched to variable loans and are riding through the changes rolled out by the RBA in the past 12 months. While variable-rate mortgage holders have been feeling the pinch of rate rises and high cost of living pressures, official data suggests arrears remain in check and are still below pre-pandemic levels, and rising home values since February has likely only further reduced the incidence of loans in negative equity.
Further evidence of the cliff morphing into a slight blip can be found by looking at the number of properties considered to be sold as 'distressed listings'. SQM Research notes that as of July 2023, the number of residential properties selling under distressed conditions in Australia decreased to 5,277, a drop of 1.1% from 5,335 distressed listings recorded in June 2023. The decrease in distressed selling activity was mainly driven by falls in NSW (down 3.6%), Victoria (down 1.4%) and Queensland (down 1.6%) compared to last month.
What does this mean for you?
Thankfully, there was a slight increase in properties listed for sale in July. The reason for the increase is considered to be more of a return to vendor confidence in the ability to achieve a good sale price – which is a double edged impact for buyers.
The reality though is that supply of good properties – at all budget levels – is still pretty tight while buyer demand is starting to surge. If you're trying to buy a property, the message for you is to be really careful.
More buyers are turning to buyers agents for help, and if you're thinking about this make sure you don't get ripped off. The buyers' agent market isn't regulated as much as it should be, and there's far too many unqualified and inexperienced people operating in the market.
Even worse, there's a heavy amount of gouging on price. Only last Friday a story was published in the AFR (link here though you need to be a subscriber to read the full story) with a couple of self styled buyers agents outlining their fees.
Not only were the ball park fees around $25,000 per search, but they're charging on a percent of the purchase price. This should be absolutely outlawed because it means a buyers agent who operates this way is actually incentivised to buy your property at the highest possible price – because they can then charge you more.
We, of course, don't operate that way. Our services are based on a flat fee so you have price certainty of costs no matter what price you pay to purchase your property. This means you're guaranteed to pay the lowest possible price for your next purchase.
You'll also save plenty on your acquisition costs because our flat fee is a LOT less than $25,000. Book in for a chat here if you want me to run through our current services and fees – though after that AFR story maybe it is time to put our prices up . . . 🤣😎.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Founder and CEO of The Property Frontline. She has more than 20 years' experience in buying property Australia-wide, and is skilled in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is experienced in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, Editor in Chief of Property Portfolio Magazine and participates on numerous committees including the Property Owners' Association.
Follow us for regular updates, or book in for a strategy session to discuss your property questions.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.