Royal Commission Impacts Lending 'Norm'

Royal Commission Impacts Lending 'Norm'

Stricter lending standards are a logical outcome following the royal commission and we are likely in the early phases of a ‘new normal’ for mortgage lending where borrowers will face closer scrutiny around their expenses and ability to service a loan and conversion rates on loan application are likely to remain lower than they have over previous years.

National monthly value of new housing finance commitments _ source: CoreLogic

While credit availability seems to be the key driver of slower conditions, other factors are also at play.

For example, supply level has elevated in some areas as the result of construction activity moving through unprecedented peaks.

The advertised stock levels have also elevated in many cities as the result of few buyers and longer selling times.

The decrease in the foreign investments sector is also likely to have an impact on the high-rise apartment sector, where the activity was more concentrated.

The consumer mindset is another factor working to dampen housing conditions as the upcoming federal election and potential changes for tax policy are weighing on their minds.

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