I enjoy being busy. I have a lot of clients, and I like to do much more work for them than hours I have available in the day. After spending what time I can with my family, my left over minutes are fleeting.
I imagine most people’s lives are like that. I work with a lot of doctors and medical professionals to help them secure various loans, and having been in medicine myself, I know their field also feels impossibly busy.
So with all of those commitments you usually have, how do you find the time to really do your homework so you know what factors will affect you as you look for your perfect home loan in Australia?
This is something I’m really conscious of for my clients — and even for people I don’t work with, who might stumble onto our website.
This month, to help set you on the right path, and minimise some of that homework, I’ve complemented information we already have available about actually getting your home loan in Australia — the research, the paperwork, the process — with some useful insights into other events and legislative changes that will affect your success in 2020.
1. The banking royal commission has changed the game
If you don’t have a thorough understanding of the banking royal commission, that’s completely understandable. For months, we have been hit with so much information, honestly, I’m sure it’s a bit of an overload for most people.
If you are looking to get a home loan in Australia, however, having basic awareness of the commission can be really helpful.
Keeping it nice and short, the royal commission into misconduct in banking, super and financial services resulted from media reporting into some quite concerning activities occurring within financial institutions.
After a lot of enquiry — thousands of submissions, public hearings and witness statements — an interim report was made public in February 2019. It highlighted some serious legal breaches and breaches of trust associated with the major banks.
Seventy recommendations have been made as part of the report, but actually, the effects of the commission came into play much earlier than February.
Most relevant for you, as you look for a home loan right now, is during the investigation, it was identified some banks failed to evaluate some of the details in loan applications sufficiently, expecting brokers to do it, despite a possible conflict of interest.
As a result, after loans had been relatively easy for most Australians to obtain for quite some time, suddenly the process became much more cumbersome and applicants’ submissions were reviewed much more carefully.
This, among other influences from the commission, resulted in a ‘tightening’ of the market and more people finding it difficult to get a loan.
2. The real estate market is challenged by rapid change
If you keep up with the news, it will come as no surprise to you that, after the highs of the last few years, the real estate market is now leveling out and prices are coming down.
The issue with this period of decline is many property owners who are looking to sell, don’t seem to be ready for it. Despite the best efforts of most agents, asking prices are still often above current market value.
When banks assess your application for a loan, they conduct their own valuation of the property, and lend you an amount based on their result, regardless of the asking price, or your offer.
If their value is less than the amount you need to pay, you may need to find the difference, look for another lending institution or pull out of the purchase.
When looking for a property, do your homework. Find out its value in the current market — not two years ago — and make sure what you are willing to pay is reasonable. If you are challenged to find a loan that works for you, consider speaking with a broker.
3. Comprehensive credit reporting expands
Finally, a positive! In 2018, new legislation required lenders to start sharing more data about your credit history with credit bureaus. Comprehensive Credit Reporting mandates positive data should now be shared, as well as the negative data that has been included in the past, to make up a more complete credit record.
Historically, a few blemishes may have resulted in your loan application being denied. With positive data also now mandated to be included, those of you with a few spots on your record, will have a much better chance at a better deal because lenders will have your full story, not just the negatives!
4. Open banking can help you get a better home loan in Australia
Open banking began to be phased in throughout Australia in 2019.
This will provide you with more control over the data financial institutions store about you. While there is still a grey area around who owns data, open banking will enable you to give access to data about yourself, that may be held by one institution, to another institution, with ease.
Open banking potentially paves the way for you to achieve a better deal, by creating more competition in the market.
According to a speech in 2018, then Treasurer, Scott Morrison said, “Granting third-party access to your data will allow rival providers to offer competitive deals, products that are tailored to your needs, and enhanced services that meet the customers where they are at. Banks won’t be able to afford to take customers for granted, and lock other competitors out.”
There are a lot of changes — both positive and negative — on the horizon this year for Australians looking to get a home loan. If you’re unsure of how these changes might affect your options, don’t hesitate to call us at Bang On Investments for a friendly chat.
*Every client’s situation is unique, Terms and conditions apply, contact as to initiate a full application assessment for you, to determine an outcome.