Low rates but no bubble

LARGE mortgage broking groups do not expect a house price bubble to emerge in 2021, even as sharper home loan pricing, a spate of lender cashback offers and incentives for first home buyers trigger higher demand.

The views of listed firms Mortgage Choice and AFG come as December building approvals surged, with those for private sector houses climbing 15.8 per cent to a record high from the prior month.

Overall demand for mortgages has been buoyed by the federal government’s HomeBuilder stimulus payments, record low interest rates and enticing offers in the market.

RateCity’s database has 24 lenders offering cashback when borrowers refinance their home loan with them, ranging from $1500 to $4000.

But despite those offers, which need to be carefully assessed alongside interest rates, fees and conditions attached to a loan, some banks and lenders are still taking as long as three months to settle a mortgage.

“There are some institutions that are turning around applications very quickly and some institutions that are not turning them around very quickly, so that’s another piece of this puzzle,” Mortgage Choice chief executive Susan Mitchell said.

She is positive on the market’s prospects as brokers field strong demand, but does not anticipate a bubble scenario given COVID-19 loan repayment pauses and other stimulus measures are rolling off over coming months.

“I’m not worried yet. I think we still need to play through what happens when some people come off loan (repayment) hiatus and how that actually works into the system,” Ms Mitchell added.

The Reserve Bank this week held the official cash rate at 0.1 per cent and is likely to keep rates on hold until 2024 to help underwrite an economic recovery.

AFG boss David Bailey said while demand was robust for home finance, he held some concerns around the apartment market, given factors such as a reduction in international students, and soft investor demand.

Record low fixed mortgage rates in the market have led to changing borrower preferences.

Mr Bailey said the proportion of customers opting for fixed rate products had more thTanHdEoDubOleLdLtoAR29.2 per cent from a year earlier. Ms MitchUeSll said Mo7r6tg.1a4ge C-0h.1o7icce

Japan 79.98 -0.13y was seeing 30 per cent to 35 per

Euro 0.632 +0.001e cent of people fixing their

NZ 1.054 -0.008d hoUmK e loan rate5, 5u.7p4 from-0.a0v1perage levels around 10 per cent to 15WpeErcEeKnt(. US¢)

National Australia Bank’s 76.6 subsidiary UBank has the lowest76.t5hree-year fixed rate at 1.7576p.3er cent.