In March we saw the Reserve Bank take the extraordinary step of cutting the official cash rate twice, bringing it a record low 0.25%.
This decision was made in response to the COVID-19 outbreak, with the Reserve Bank Board hoping shelter the economy from the fallout of the virus.
"The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus,” said RBA Governor, Philip Lowe.
Banks and other home loan lenders soon followed by making adjustments to their fixed rate offers, with some even cutting rates to below 2%.
But will this move work in the favour of hopeful borrowers looking to purchase a property during a pandemic? Mozo Home Loan Expert, Steve Jovcevski say yes… if you qualify.
“If you have a stable income and your job is secure, it is absolutely a great time to buy for the first time in years. If prices drop in the future and you come across someone who’s really desperate to sell, you could snag a serious bargain,” he said.
Banks adjusting lending criteria for high risk borrowers
Despite cutting fixed rates, many lenders have reportedly tightened the ropes on their lending practises for borrowers looking to purchase property or refinance.
For instance, applicants with jobs deemed riskier, such as those in hospitality, tourism or Aussies who are in casual or self-employed work may find it harder to get the backing of a bank during this unprecedented time.
Online lender, Athena announced on its website that it would be pausing home loan applications until further notice while homeowners looking to refinance their existing mortgage may face a longer waiting time due to high demand and may only be able to borrow up to 70% of the property’s value.
What does all this mean for buyers?
With the current social distancing measures in place, buyers may be finding it tougher to nail down their dream property with private inspections and online bidding now becoming the new norm.
According to recent figures by CoreLogic, 45% of auctions were withdrawn from sale last weekend, with 84% of auctions being sold before the event.
On the other hand, he encouraged eligible homeowners to take advantage of the current low interest rate environment by trying to refinance to a better deal.
“If you are thinking about refinancing, your first step should be talking to the lender. Properties at the moment are being valued using past data, which can make lenders a little uneasy, so talking to the lender about having a valuation may be the way to go,” says Jovcevksi.
“Another option is to ensure you’ve built up a decent amount of equity in your property before you apply,” said Jovcevksi.
So if you’re ready to find out how much you could be saving on your home loan, head on over to our refinancing comparison tool!