Investor loan inquiry jumps after interest rate cuts, could boost competition in property market: experts

More investors could be set to dip their toes back into the property market this spring, with a surge in inquiries after the two recent interest rate cuts, new data shows.

Any jump in investor activity could put pressure on first-home buyers, who have been taking advantage of lower prices and a drop in competition to snap up affordable options.

Many investors stepped out of the market, particularly in the largest capital cities, after the bank regulator clamped down on interest-only loans two years ago.

The loan caps were removed late last year, and housing market sentiment has picked up in recent months after the Coalition’s federal election win meant investors could continue to enjoy negative gearing tax breaks.

Official interest rate cuts in June and July offered another boost to confidence.

The number of people searching for investor loans doubled in the week after the June rate cut, compared to the week before, on comparison platform Finder.

After the July rate cut, searches for investor loans jumped another 87 per cent, figures from Finder show.

“The doubling of traffic is definitely a significant result there – the interesting thing will be to see whether it has any result in the market,” Finder insights manager Graham Cooke told Domain.

He noted the rise in auction clearance rates in recent weeks and a lift in rental yields. Price falls appear to be bottoming out, with Melbourne prices up and Sydney prices only slightly lower over the last quarter on Domain figures released on Thursday.

“All of those could potentially be pointing to a light at the end of the tunnel,” he said.

The jump in interest is in sharp contrast to the same time last year, when the amount of searches for investor loans was little changed after the June and July decisions to keep rates steady.

Some economists tip rates could fall even lower as the central bank aims to boost sluggish wage growth.

Some potential investors were getting ready for the spring selling market now, said Chris Foster-Ramsay, principal finance broker at Foster Ramsay Finance based in Melbourne.

He has seen a lift in investor inquiry recently, with investors also asking how much more they can borrow now the bank regulator relaxed a key mortgage serviceability test.

“What we’ll see in six to eight to 10 weeks’ time is competition between a first-home buyer market and the investor market, in the sub-$600,000 to $750,000 market,” he said.

“It’s going to be that head-to-head thing we saw two, three, four years ago where investors and first-home buyers were competing for the home … Maybe we’ll see investors have got deeper pockets than first-home buyers.”

Buyers’ agent Jarrod McCabe has noticed a lift in investor inquiry, but says it’s an “uptick” rather than a “flood”.

“There’s certainly talk about value for money, so are they able to pick up properties for good value at auctions,” the director of Wakelin Property Advisory said.

“The interest rate cuts we’ve had in the past couple of months have certainly helped that, and given people more confidence.”

Although his buyers are preparing for the spring market, he warns that they may not be able to find what they want right away as stock levels are low.

“It’s really important to be patient and make sure the right asset’s selected,” he said.

“[And] we’re not in the buyer’s market we were in last spring … you need to be prepared to pay a fair price.”

On the ground, The Agency chief executive Matt Lahood is yet to see a wave of investors bidding at auctions.

“We’ve seen the first-home buyers come out strong and the investors drop off to a certain degree,” he said.

But he would not be surprised to see investors returning in spring. “There’s no reason why they [investors] shouldn’t come back,” he said.

Finder’s Mr Cooke said the low interest rate environment made it more important for borrowers to watch their mortgage costs than ever.

“It pays to shop around obviously, but now it pays to shop around more than any time,” he said.

“Even if your bank doesn’t pass on the full rate [cut] that you want, now is probably the best time in the market to call your bank and see if they can do anything more.”