Whether you’re a first home buyer, or planning to upsize, downsize or invest, the COVID-19
coronavirus will have caused some uncertainty over your plans.
The Lending Environment
Whilst there has been some change in the way we inspect and purchase properties on-line,
banks have also amended their lending criteria and are focussing on the stability of a
borrower’s income, choosing to shy away from those employed in ‘high-risk’ industries. Some lenders have also dropped the maximum loan-to-value ratio (LVR) they will consider.
In addition to specific industries perceived to have higher risk (hospitality, retail, tourism) the
lenders are reviewing the type of income borrowers are earning and are far less likely to rely
on unstable income such as temporary, casual, overtime, bonuses or season income.
For self-employed borrowers much more detail is being requested and up to date
management accounts and BAS statements are required and the financial results of the 2019
tax year are taking a secondary position.
In some cases, borrowers whose loans were pre-approved before COVID-19 are being
requested to produce more recent payslips to demonstrate that their income has not been
For investors, rental income may be discounted if a property lacks a paying tenant.
So, what should buyers do?
Whilst there has been some reduction in prices and the number of properties being offered for
sale, there has not as yet been a dramatic change in the property market, due in part to:
- The RBA cutting the cash rate twice in March 2020
- Banks coming up with policies that am to assist with loan payment, including
mortgage relief, – ‘freezing’ repayments for 6 months, offering fixed rate home loans,
refinancing, and extending the mortgage term without penalty.
- Investors opting to invest into the property market, which is currently seen as less
volatile than the share market.
- Government financial stimulus packages, which is allowing people to access some
funds to tie them over in the short term.
Given the current low interest rate environment, and provided your income and job remains
stable, now may be a good time for refinancing or to make a purchase. Rates are at all-time
lows (particularly fixed rates).
Basically, if your income is in any way uncertain you should consider putting your property
buying aspirations on hold, or at the very least talk to your employer before investing.
On the other hand, if your income is assured then the next few months are likely to be one of
the best times to buy.