Owner occupiers see opportunity – Siobhan Hayden

There has been a lift in the value of owner-occupied dwellings.  It’s increased slightly month on month.   Is it a reflection of maybe a drop-off in investor borrowing? Siobhan Hayden, the COO for HashChing is here to talk about that.
Kevin:  Some good news: there has been a lift in the value of owner-occupied dwellings. It’s increased slightly month on month. Joining me to talk about this and the impact of that is Siobhan Hayden, who is the COO for HashChing.
Siobhan, not a real surprise here, but is it a reflection of maybe a drop-off in investor borrowing?
Siobhan:  Yes, definitely. The first-home owner activity, we’ve been seeing a gradual increase, particularly in New South Wales and Victoria, since the changes to stamp duty provisions in July last year. And of course, the macroprudential measures to curb investment lending and interest-only features, etc. has seen that decline. So yes, we’re seeing a complementary balance point.
Kevin:  Are we seeing a few people move away from the big four banks?
Siobhan:  We’re definitely seeing that in HashChing, particularly off the back end of some of the press articles last year around some of the cultural points of banks’ behavior. I think people are realizing that their commitment to a particular brand as an individual is not really paying them dividends. What would you call it? Their bank loyalty doesn’t seem to pay any returns these days.
Kevin:  We’re seeing a softening in house prices as well. It’s led to increased home loan activity for owner-occupiers and investors.
Siobhan:  For first-home owners, absolutely. That’s what we’re seeing, definitely. We did a survey in February of 780 home loan repayers – 58% of them were first time owners – and found some different trends, particularly their concern around the value of homes and seeing that shift and change in New South Wales and Victoria, but also around the challenge of actually getting the loan and finding the right deal, which doesn’t surprise us. There’s so much on the Internet about property prices and deals, it’s all very confusing.
Kevin:  Siobhan, just before we leave this topic, what did you learn about stress in your survey?
Siobhan:  We identified that a large proportion of people are quite stressed currently, even though we have historically low interest rates, which is quite concerning. All economic indicators suggest that the cash rate won’t increase until probably early 2019. However, if people are already making sacrifices – which is what we found – to make sure that they can make their mortgage repayments, obviously any movement… We found that nearly 18%, even a $50 to $59 per week increase would be considered unaffordable.
Kevin:  Wow, that’s very marginal, isn’t it?
Siobhan:  It is.
Kevin:  Is that a reflection on the banks not doing their due diligence and maybe protecting the borrower more?
Siobhan:  We also found – which is obviously a normal correlation – the higher the interest rate currently being paid by a mortgage repayer, the more likely they are to obviously be contributing more of their income, which makes perfect sense. But we also found it’s very common for male applicants to take a secondary income stream through the shared economy – like Uber driving or such things or Airbnb – to income to complement their income to pay their mortgage.
Kevin:  Nothing wrong with that, but nothing worse than having to be in a situation where you have to do that. What would be your advice to borrowers in terms of trying to anticipate what they may be able to afford in the future?
Siobhan:  I think it’s interesting that people aren’t across the current rate and aren’t passionate about making sure that they have a competitive rate. If you have a loan for a long period of time – 25 or 30 years – there’s no point paying 1% interest higher than you need to be for that period. That’s a huge cost to you as a family.
So, making sure that you know where you’re at… Whether you need to change is another story, but knowing your position is absolutely paramount.
Kevin:  Yes. With things like comparison rates, that’s fairly easy. It used to be really complicated and difficult to make that change, but that’s no longer the case, is it?
Siobhan:  It’s not. Whether you would think to go into your local branch or whether you think to talk to a mortgage broker – which nearly 60% of consumers do today – everyone tends to start on the Internet, and I think that that’s where things get very confusing.
There’s lots of information, it’s not always clear, some rates are discounted, some rates are not, some are introducer models – which do little to no inquiry into your financial position – so consumers are a bit overwhelmed, I think, and our survey definitely found that they find the paperwork particularly very challenging, and finding the right deal extraordinary challenging.
Kevin:  Almost threatening to think that you’re going to change your bank, because people still have a fear of banks, don’t they? That they wield this big stick, and “I just don’t want to upset my bank.”
Siobhan:  Definitely. We’ve had customers through HashChing particularly who have gone to their bank, asked to have their loan reviewed and their interest rate reconsidered, particularly when they see advertising from their own bank for new loans at a cheaper rate – which is obviously very confusing for consumers – and they’ve not been able to get any joy from that experience.
So, definitely having a partner working with you that is across multiple lenders is definitely the way to go, and that’s obviously the mortgage broking proposition.
Kevin:  I know this is probably a rhetorical question, but in the event that you were to go to a broker and you did have your best deal, you’d hope that your broker would tell you that’s the case.
Siobhan:  Definitely. And the broker has to work in the best interests of their client. There’s a lot of understood work to get a loan. You do have to put your financial position together. No one wants to go through that process if they’re not going to get a better outcome at the end of the day.
So, understanding that there are a number of points of information – your income, your expenses – all of those things need to be considered and reviewed, and then you can be provided with a more accurate view of what interest rate is possible.
Kevin:  If you’ve been fired up and you want to have a look into this, the best place to go is HashChing, and you’ll get all the details there.
Siobhan Hayden from HashChing. Thanks for your time, Siobhan.
Siobhan:  No worries. Have a great day.

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