Financing a Home During Corona: Your Questions Answered

How much have house prices fallen?

The majority of regions have fallen around 10%, although some areas remain stable. Good properties are still maintaining their value and being sold for a premium price.

Do you expect prices to fall further?

Not really. There might be a slight dip in prices as the market reacts to ongoing Covid-19 news, but this will correct quickly given current market prices and low interest rates.

What do you think will happen to prices when the pandemic eases?

When things start going back to normal, we will have a huge backlog of supply and demand that should generate plenty of activity in the market. This normally means sharp price increases.

Is it harder to get a home loan during COVID-19?

Yes. Lenders are uncertain about applicants’ employment situation, which makes it harder to get a loan.

COVID-19 has also made it more challenging for brokers, lenders and clients as they get to grips with technologies such as zoom to complete things such as loan-application appointments.

Has lending criteria changed?

It has. Lenders are a lot more cautious about part-time and casual workers, and they are reviewing the financials of self-employed workers much closer to determine any downturn in revenue. Lenders have also reduced how much overtime, commission and rental they are prepared to accept when servicing an application.

But don’t let that put you off. If your employment conditions are secure and you’ve been saving for a long time but have been struggling to get into the property market due to demand, now can be a great time to buy.

Do you expect interest rates to stay low?

It has become clear that low interest rates are here to stay for many years to come. This offers great peace of mind when it comes to repayments.

Has the minimum deposit lenders require gone up or down during COVID-19?

It has gone both ways; some non-lenders have decreased their deposit requirements and others have increased it. None of the major banks have reduced their deposit requirements.

What government help is available?

The First Home Owner’s Grant (FHOG) provides $10k for first home buyers in metro Victoria and $20k in regional Victoria (learn more about the grant in this article).
In addition, first home buyers spending up to $700k are eligible for up to a 50% discount on stamp duty.

The Federal government has also introduced a $25k HomeBuilder Grant for any owner-occupied property purchase up to $750k. However, the distribution of funds has yet to be finalised, which is creating considerable confusion in the market. Here’s an article that covers the HomeBuilder Grant in more detail.

I’m thinking of applying for a home loan now – what should I consider?

• Is your job secure and current income level achievable? For example, are your overtime, bonuses and commissions going to continue?
• How much deposit do you need and how much should you be saving each month to achieve this goal?
• What can you afford to pay in monthly mortgage repayments? This will determine your maximum spend and borrowing amounts.
• What’s your credit score like? Pay off all your existing debts early, such as phone bills and credit cards, to ensure you have a high credit score to improve your credit worthiness to a lender.
• Do you have evidence to show that you are in control of your household expenses? It’s also wise to look for ways to reduce your living expenses as this will have a direct impact on your maximum spending limit. You can get some great budgeting tips here.