Thursday, June 1, 2023
HomeEconomyAustralia's property downturn leaves homebuyers in double mortgage shackles

Australia's property downturn leaves homebuyers in double mortgage shackles

Byron Kaye

SYDNEY (Reuters) – Australia’s housing downturn is pushing many homebuyers into a double bind: They’ve taken out a mortgage on their new home but have been holding on to it A good deal on their old home forces them to also hold a bridging loan to pay off their previous mortgage.

Now that prices are falling at the fastest pace in four years, compared to 25% annual price increases a year ago, the terms of these bridging loans are higher than The typical three-month span has doubled or even quadrupled.

This is good news for many lenders in a shrinking mortgage market, falling house prices and rising interest rates are driving business away, but it means borrowers who are still braving the market face greater financial stress.

“I think some people got caught,” said Sydney-based listing agent Julie Buchanan, who recently extended a marketing campaign for high-end properties. o Three months after six months due to low buyer interest.

“Many of them had to revise their price expectations,” she said. “If they can’t get the price, then they can use bridge financing to get them over the line. Then they might hold two properties.”

Most properties are still in the three Sales – Monthly time frame for standard bridging loans: The average home in major Australian cities sells 31 days in August, and sellers may also consider a contract settlement time of about 6 weeks.

But according to CoreLogic, up 63% since November, home sellers may expect the market to grow more slowly after four straight months of interest rates Raised, more expected – next on September 6th.

Joe Bennett, senior loan relations director at bridge lender ASCF, said inquiries that as interest rates rose, the average tenor of loans offered by his firm had ballooned from three months to six month to year.

“Historically, when the market is hot, they just want this loan or three months because they know — and assuming it’s realistic — they can get this Saturday List their property and put it up for sale by next Saturday,” Bennett said.

“This is not going to happen now.”


Bridgit Financial Services, a bridge financing provider Chief executive Aaron Bassin said his company plans to increase the maximum loan from six months to one year due to customer demand.

“If the housing market continues to slow, there will be a need for longer-dated products, and that’s something we’re working on right now,” Bassin said. He added that August was a record month for his company’s total loans.

Australia and New Zealand Banking Group Ltd, the country’s fourth-largest lender, recently doubled its maximum bridging loan from six months, reaching a No reason was specified.

Bridge loans are often seen as a last resort by homebuyers because they effectively leave them with two mortgages at a time – one for the property they’re buying and one for the property they’re buying for the property they are trying to sell. Also, bridge loans have higher interest rates because they are short-term and require a quick turnaround.

But bridge loan providers say their transaction volumes have jumped despite warnings from retail banks of increased competition and an overall shrinking mortgage business.

Published on Thursday The value of new home loans fell 8.5% in July, nearly double the 4.4% drop in the previous month, government data showed. The data does not break out data for bridging loans separately.

While the four-month rate hike forces all lenders to raise mortgage rates, they may also allow bridging loan providers to close the gap between their rates and those on standard mortgages, allowing Their products are more popular with borrowers.

“We raised rates and prepared for a slowdown, but it’s still all in,” Jack O’Reilly (NASDAQ: NASDAQ) :ORLY), said the chief executive of, a bridging loan specialist who has seen an increase in monthly loan volumes 50% compared to a year ago.

“You would think it would slow down because of higher prices, but I would say that activity in this area continues to increase.”



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