APRA’s proposed relaxation of the home loan lending rules will help property buyers even more than today’s interest rate cut, says Real Estate Buyers Agents Association (REBAA) president Rich Harvey.
Last month the Australian Prudential Regulation Authority (APRA) recommended a relaxation of the benchmark rate of 7 per cent to assess a borrower’s capacity to repay a loan, now allowing banks to assess loans at 2.5 per cent above current rates.
“This will have an even greater impact on increasing a borrower’s capacity which will eventually filter its way into the economy and support the property market,” said Mr Harvey.
“While today’s interest rate cut will give borrowers more mild relief from bank interest, the major benefit is that it helps stimulate demand for borrowing and injects confidence into the property market.
“On the flip side it also demonstrates the economy is sluggish and needs monetary policy to generate more activity.”
Mr Harvey said interest rate cuts traditionally signalled that the property market needed some assistance to turn around after significant price falls or economic threat to the health of the market in major capitals.
“The market is likely to plateau soon, then commence its upward price cycle again but certainly not return to boom conditions,” he said.
“Buyers should not have fear of missing out (FOMO) again as we expect to see a more balanced market with more activity but not crazy conditions.
“Potential buyers would do well to consider getting ahead of the next property cycle by seeking finance pre-approval and engaging a REBAA accredited buyer’s agent to help them uncover the best opportunities in this market.”