There’s every indication now that tighter lending conditions will hamper recovery in the housing market anytime soon. In short, ‘the BIG SQUEEZE in lending is on. As the following news items indicate, even the enthusiasm generated by the first homebuyers grant can be almost certain to dampen significantly in the months ahead.
Gone are the days, it would seem, that smaller lenders can compete with the BIG FOUR, and back to the days when the BIG FOUR had mortgage lending cornered.
WHEN the Bank of Queensland appointed corporate advisers in December to review acquisitions, strategic partnerships, mergers and possible takeover offers, it sent a clear message that any rival outside the Big Four banks needed a new set of tricks to compete.
Bank of Queensland chief executive David Liddy told shareholders: “To compete with the big banks, smaller banks such as BoQ, as well as credit unions and building societies, have been merging and will continue to do so.”
Two weeks later, on December 24, Wizard Home Loans was sold to Commonwealth Bank and Aussie Home Loans for $26million. The remaining non-bank lenders, Resi Mortgage Corp, First Mac, Pepper Home Loans, Better Choice Home Loans, Beat Home Loans and a few others are expected to either close down or merge as credit conditions worsen.
THE Commonwealth Bank will tighten borrowing rules for first-home buyers to insist they contribute at least 3 per cent of the purchase price in their own money, in addition to any available government grants.
The move is in response to growing industry concerns about the quality of loans to the fast-growing, first-home buyer market and is in anticipation of interest-rate hikes in coming years, due to the expected inflationary impact of the large, recent increase in household income.
Currently, government grants of up to $14,000 for an existing home and $21,000 for a new home mean some first-home buyers can purchase dwellings with a 5-10 per cent deposit and no cash contribution of their own.
THE property market has slowed to a whimper, with sales crashing to less than a third of last year’s levels, despite a surge in first-home buyers capitalising on low interest rates and grants.
Just over 500 properties have sold at auction this year in the major markets of Sydney, Melbourne, Adelaide and Brisbane, compared with more than 1800 at the same time 12 months ago.
Only 1775 properties have been placed on the market since January 1, compared with more than 3700 last year.
While auction clearance rates continue to improve, thanks to strong first-home buyer demand for cheaper housing, softness in middle and upper markets is putting the brakes on sales.
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