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What did the unpredictable situation (COVID-19) do to the Australian mortgage market?

    2019 brought negative growth in consumer borrowing in Sydney and Melbourne and a predicted increase in return of settlement. The unpredictable COVID-19 Crisis has caused many lenders and banks to slash interest rates - according to MOZO, last week ING dropped its 2-year fixed rate to 2.09%. Interest rates are also expected to continually decrease in the coming years.

The Government’s Response Through Policies

    The government is progressing with the First Home Loan Deposit Scheme through the extension of the loan approval period by an additional 3 months. However, this may not be enough for buyers to continue with their property buying journey. Morrison continues with proposals of tax cuts for firms earning under $50 million, while personal income tax cuts begin the following financial year despite introducing new measures such as the subsidy scheme. To help businesses, Morrison has announced a new subsidy program to prevent millions of people from losing their job. “The subsidy is the central plank in a $130 billion economic stimulus package, the third and largest package the Government has announced in response to the coronavirus” (Worthington, 2020).


(Mardiasmo, 2020)

How will it affect the real estate market?

    “While Australian banks’ current asset quality is very strong, it will deteriorate significantly if disruptions persist for a prolonged period and push up the unemployment rate, which will lead to more impairments of residential mortgages, which comprise approximately two-thirds of banking system loans,” Moody’s stated (Kadib, 2020). According to the ratings agency, the outbreak is set to “increase the strain” on the banking sector’s operating environment and impair loan performance, with an increase in loan provisioning and record-low interest rates to squeeze bank margins. This suggests that if the situation is prolonged it will cause difficulty in bank loan approval due to stricter credit checks.

VC Capital's Response

    In Deliotte’s 2020 Australian Mortgage Report, Susan Mitchell from Mortgage Choice mentioned a “need to ensure we invest in the IT systems and process”. We continue to provide a seamless mortgage solution, now attainable through our free 1:1 online consultation which can be booked directly on the Vast Capital Website. This is the solution to getting mortgage solutions for anywhere, even from home. We continue to use simple and quick internal credit checking methods so that we can provide low interest and flexible products during the pandemic.

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