How COVID-19 has changed lending & what it means for the future of house prices! 🏡💲
With a heavier focus on #StayAtHome and Social distancing, living online has completely changed the way we do life. In this months update, we’ll be covering how lending has changed, the domino effect COVID-19 is having on house prices, and look at the consequences to clearance rates.
No need to go on an Easter egg hunt, here’s how banks are treating lending post COVID-19
We’ve all heard that we can freeze our repayments for 3 or 6 months, move to lower fixed and variable rates, and even of the government initiatives here to support us, but did you also know that;
Not just lenders, but brokers like us are now conducting meetings online via Skype/Zoom.
When it comes to verifying your identity, some lenders now require a photograph or a screenshot of the video, of yourself holding ID documents such as your passport or drivers licence next to your face.
Due to a majority of people now working from home, some lenders will require verbal or email confirmation on your declared employment details.
Speaking of employment details – depending on the type, frequency and industry of your line of work, some lenders will outright refuse to consider your income. Applications that involve only casual employees or contractors will not be considered by some lenders.
Bonus, commission and overtime income will be assessed at 50% for servicing purposes (previously 80%) for some lenders.
Turnaround times have been severely affected as a result of COVID-19, regardless if their processing is done offshore or onshore, loan processing can take anywhere from 24 hours, to 30 business days from the date of submission – choosing the appropriate lender is vital now more so than ever.
This is an ever-changing financial landscape we’re on and these new lending practices really drive home the point that doing things remotely is okay and encouraged.
While the coronavirus isn’t forever, lenders are just being mindful to do the right thing by their customers and for now, this is just the way things will have to remain. We’re staying close to these changes, paying careful attention to them so we can be well-positioned to support you.
How unemployment rates and the coronavirus will impact future house prices
One of the more unfortunate results of the COVID-19 pandemic affecting the globe is the rise in unemployment. Australia, in particular, has seen it sit at a 5.2% unemployment rate with experts predicting it to grow to 10% by June quarters end.
But it’s not all doom and gloom, there is some light at the end of the theoretical tunnel!
While the impact on the property market is uncertain at this point in time, some experts are predicting house prices could fall as much as 10-20% if we hit peak unemployment levels.
It’s a bitter-sweet sentiment but it means it will be easier for first homebuyers to break into the market or purchase an investment property. We at Black & White Finance don’t think it will fall by that much.
Head of Investment Strategy and Economics and Chief Economist for AMP Capital, Dr. Shane Oliver said this highlights the need for the Government & the RBA to minimise the fallout from coronavirus shutdowns in terms of businesses and jobs, which is what it is trying to do at the moment.
“Our base case is for a rise in unemployment to around 7.5% which is likely to drive a 5% or so dip in prices ahead of a property market recovery into next year”.
Of course, the catch-22 of this is that with rising unemployment, a steady source of income will be harder to achieve for some. If you’re lucky enough though to have cash saved, a safe-ish job, or have equity in your existing property, it can be a great opportunity to get some property under your belt.
Just like the price of chocolate after Easter, clearance rates drop!
Lenders and brokers aren’t the only ones conducting their business online during this uncertain time, Real Estate agents are too! As you’ve probably heard, real estate auctions are now online in lieu of the pandemic.
Given the pensive economic environment at the moment, it is difficult to determine how successful this initiative has been accurately, but it is nice to see a sense of urgency and desire for business to continue as usual during these times.
Clearance rates dropped this week ending 12 April 2020, to 63% in NSW.
The number of properties sold at auction has also fallen dramatically. With significantly fewer sales, some economists believe this could mean that prices may not fall as drastically as some are saying because if there is no record of a lower sale in that specific suburb, then the data remains the same. When the market picks up again, and if the stimulus does what it’s intended to achieve, this could be the case.
Final Thoughts
A month ago, social distancing was a phrase almost entirely unused by the wider public, today however, it’s become a way of life for us, it’s how we interact (or don’t) with one another, how we work, play, and go about our day to day lives.
We’ve seen many industries chop and change the way they operate to be more in line with the current social climate.
The economic predictions for the future are for the most part unclear, but there are positive undertones throughout.
One thing for certain is that we will pull through and adapt regardless.
We're here to support you.
Stay safe, stay healthy and see you in next month’s blog!
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