A quick look at how Australia’s mortgage market works

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The property market has been called Australia’s national obsession, with people apparently spending more time researching property than they do at the gym or speaking to their parents!

But while you might like to look at real estate, how much do you really know about the mortgage market that makes your homeownership dreams reality?

It’s very big

Australia’s mortgage market is huge with nearly $17.5 billion new home loans for owner-occupiers and investors approved in June 2020 alone, according to the ABS. Home loans for first time home buyers just getting started on the property ladder made up 22% of this sum.

With plenty of choice …

There are more than 100 home loan lenders in Australia, which includes banks and non-bank lenders.

What’s the difference between a bank and a non-bank lender? Banks are classified as authorised deposit-taking institutions (ADIs) which means they can offer deposit and savings accounts to customers as well as make loans. In contrast, non-bank lenders are not ADIs so can only offer loans.

And advice (if you want it)

Around 60% of all home loans in Australia are organised with the help of a mortgage broker.  Mortgage brokers are middlemen between lenders and property buyers. Their role is to help borrowers secure a home loan from a lender that best suits their circumstances.

There are more than 15,000 mortgage brokers working in Australia, of which many are self-employed. As a borrower, you don’t commonly pay a fee to use a broker’s service. Instead, they typically get paid a commission by lenders on each loan they arrange.

There are strict regulations

Banks, non-bank lenders and mortgage brokers are all regulated:

  • Banks, as ADIs, are regulated by the Australian Prudential Regulation Authority (APRA)
  • Non-banks and brokers are regulated by the Australian Securities & Investments Commission (ASIC)
  • Brokers have to hold an Australian Credit License (ACL) or be authorised under an ACL
  • All three parties have to abide by responsible lending guidelines

Responsible lending guidelines protect borrowers from taking out unsuitable loans that may cause them hardship in the long run. To help them assess whether you can afford a loan, lenders should look at your individual financial circumstances. This doesn’t just include your income, employment status and assets, but also your existing debts, living expenses and the number of dependents you have.

Australia’s AAA Credit rating

This safe, competitive mortgage market is part of the reason Australia is one of the few countries in the world to enjoy a AAA credit rating. This is the highest possible rating that a country can get from the international credit rating agencies Fitch RatingsStandard & Poor’s, and Moody’s.

Need a home loan?

Whether you’re buying a home, an investment property or want to refinance onto a better deal, Well Home Loans may have just the right loan for you. Our award-winning mortgages have the kind of features you’d expect from a bank, with the low rates from an online lender and the personal support you’d expect from a family-run company.

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