3 things to know about the future of home loan buying in Australia for 2023
With higher interest rates and falling prices, there's no question the loans landscape is changing. We take a look at some of the key trends for this year.
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Given the wider concerns around cash rate rises, it's no surprise that many Australians are curious about the future of home loans.
So let's dive into some of the key home loan trends for 2023.
1. Streamlined application processes with digital lenders
Traditionally, home loans have been pretty complex beasts for Australians to grapple with.
But we're beginning to see a shift. New digital lenders in the market are offering streamlined, simpler application processes, while also removing unnecessary features.
Unloan is one of the lenders currently helping drive this shift.
Applicants don't need to provide reams of paperwork – automated assessments via a simple online application form help streamline this process.
Additionally, Unloan doesn't charge fees on loans* and also works to encourage customer loyalty by providing an annual rate discount.**
Streamlined approaches to lending like this are likely to become increasingly common as borrowers look for less complex products and lenders look to provide them.
Of course, everyone's needs are different. There will likely always be a need for more complex loans to fit unusual circumstances.
But if your own situation is relatively straightforward, you may be able to benefit by consulting with some of the newer, digital lenders currently in the market.
2. The role of mortgage brokers
The last couple of decades have seen mortgage brokers taking an increasingly large role in Australia's home loan landscape. According to the MFAA, 69.3% of all new residential home loans between October and December 2022 were facilitated by a broker!
This isn't surprising. With the home loan landscape undergoing such regular shifts, the diversity of products available and the increased number of lenders in the market, it's near-impossible for the average person to keep up.
So brokers will almost certainly have a significant role to play in the future of home loans and buying in Australia.
Working with a broker can provide you with access to expertise, better leverage with lenders and save you time and money.
With that said, taking a DIY approach can have its advantages too.
For one thing, you'll have a greater choice of lenders to pick from.
Brokers can't feasibly work with every lender out there. Although they have best interest duties for their clients, they're still working with a specific group of lenders.
Many new loan products also don't have the same level of complexity as legacy products, so a broker may not be strictly necessary if your situation is relatively straightforward.
3. More refinancing and a shift in borrowing power
Research from Finder has suggested that overborrowing has been an issue for plenty of Australians.
With the cash rate jumping 10 times since May last year, it seems likely that plenty of Australians will be looking to refinance this year.
It's important not to rush in, though. The potential savings need to be weighed against the potential expense from fees and switching costs.
But that said, impressive savings can be made.
As with providing loans, digital lenders are likely to step into the gap here, offering a range of refinancing options.
Unloan, for example, doesn't charge fees for refinancing with it*.
It's possible we'll also see a slightly more conservative approach from some traditional lenders. Factors such as the lender needing to account for the borrower's ability to repay in the face of future interest rate rises will also have to be weighed up.
As property prices have fallen in conjunction with interest rates rising, some borrowers may have less equity than they realise.
So if you're considering refinancing or taking out future loans, it's worth checking your borrowing power first.
LMI and government schemes may also prove useful for those who are looking to secure their first property or move into investing.
But although the landscape is shifting, the same basic principles for borrowers are still likely to apply.
Being able to demonstrate a clear pattern of saving and fiscal responsibility will still be important. What will be key for borrowers is to be selective about the lenders they work with and ensure that they consult with professionals.