The biggest losers of Australia’s property slump

Exclusive: Mortgage brokers around the country are losing business as home loan applications plummet and dismayed sellers pull their properties off the market.

Applications for new loans have drastically fallen at Australia’s major banks, including a 20 per cent drop at Westpac and a 15 per cent slump at Commonwealth Bank since the May Federal Budget.

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The property downturn has also severely impacted the once-thriving brokerage industry, with some brokers losing more than 50 per cent of their business.

“In the last 10 years, I would think this is the biggest slump, driven mostly by the property prices,” senior mortgage broker Prakash Rai of Home Loan Experts told nine.com.au.

“There’s not much transaction happening at the moment, people aren’t selling and because they aren’t selling, there’s not many new stock in the market.”

Applications have dried across the board for both investors and first home buyers.

However brokers like Rai say the biggest loss is the distinct lack of investor loans.

“They’ve lost of their borrowing capacity,” Rai added.

CBM Mortgages broker Craig McDonald says he has witnessed a “significant drop off” in new clients looking for home loans.

He said countless investors are letting their pre-approvals expire as they wait for the market to heat up again.

“It is the quietest I have ever seen it in 15 years, the drop-off has been by at least 50 per cent,” McDonald said.

“Most of my work at the moment is refinancing.”

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One of McDonald’s clients even decided to rent for another year instead of buying – a sure sign that the property market is losing steam.

“Buyer’s agents are feeling the pinch too,” he added.

“And it’s not just in Sydney, it’s everywhere.”

Refinancing is now the name of the game for brokers and lenders.

Some of Australia’s major banks are now ramping up efforts to attract mortgage customers from rival lenders.

“Behind the scenes, the banks are working really hard stealing business from each other,” Mortgage Choice owner manager Stephen Southworth told nine.com.au.

“They’re offering rates you won’t see on the bank’s websites – they’re going straight to brokers where they’re trying to get as many people to refinance as possible.”

Southworth has recorded a nearly 30 per cent drop in new home loan applications since the May budget.

Rai agreed that lender retention teams have become more “aggressive” in their bid to keep clients in house.

“Because there is overall drop in the volume of the applications, the banks are trying to be more competitive in terms of the pricing,” he said.

SMSF loan applications skyrocket

The mortgage application slump has been offset by an unprecedented rise in self-managed superannuation fund (SMSF) applications in a bid to beat the new ban on borrowing to buy residential property.

From August 10, SMSFs are no longer allowed to enter into new loan agreements to buy or build residential homes.

In the weeks and days before this ban, lenders saw an influx of applications for borrowers hoping to enjoy the grandfather clause privilege.

Non-bank lenders wrote over16,000 residential loans to SMSFs in the year ending June 30.

“We saw a last-minute rush of people wanting to do that,” Southworth said.

“But we’re also looking at diversification. You can’t just feed yourself on residential loans anymore.”

All three brokers said they expect this property downturn to last for months to come.

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And it’s unwelcome news for an industry that profits from mortgage approvals.

“It just won’t be the same as it was before because it’s not as attractive to buy an investment property,” Southworth added.

“But there are a lot of schemes out there for first home buyers, and once it irons itself out and people understand the schemes better, you will see an influx [of applications] come back in.”