Zara: Hi everyone and welcome to Lendi's first monthly financial update.
Today's discussion, we're going to talk about the exact reason that we're doing this via
video link and not necessarily face to face and that's COVID-19 and the impact that it's
having on the housing market.
I guess what we want to cover today is what are those options that are available for homeowners
out there who are thinking about or worried about their financial situation or have been
affected.
The expert is here with me today and that's David Hyman, who's one of the co-founders
of Lendi and our CEO.
So welcome Dave.
David: Thanks Zara.
Zara: So Dave, I thought what we'd do is kick off maybe with your opinion on the current
state of the economy and how the housing market has really been impacted.
David: Yeah.
So I think the best way to start with that is really to look at where we were before
COVID-19 and then feed into what does COVID-19 mean for the property market.
Off relatively subdued volumes in 2019, 2020 started really strong.
We had clearance rates for a number of weeks off the back of last year and coming to this
year in the 80s in particular in the capital cities and that strength continued and only
was actually gaining momentum before COVID-19 through January, February and the start of
March.
David: What we've seen happen since is the social distancing restrictions have certainly
slowed things down.
Obviously the first moves were restrictions around auctions and viewings to be by appointment.
And then the following week we went from a New South Wales perspective to the soft lockdown
that we have now.
But I think looking ahead, what it means for people who either own property or looking
to buy property, I think the pricing changes are going to be relatively subdued.
While I think some economists were forecasting and some, I know UBS was forecasting a 10%
increase in property prices in calendar 2020.
I think we're going to see moderate declines but moderate declines on relatively low volumes.
David: Happy to talk about this in a bit more detail, but the RBA and obviously the federal
government have come in and provided quite a lot of stimulus across a number of different
levels.
And one of those areas is in the funds that banks can access to lend money.
And the RBA has provided some relatively cheap prices with relatively large facilities for
the big banks to ultimately lend to consumers.
And that's really underpinning a number of different things.
It's underpinning their ability to lend, but also the guidance that the regulator, APRA,
has given to the banks in conjunction with government means that there's not going to
be an influx of forced sellers like there was in markets like the UK and the US through
the global financial crisis because the banks are allowing people to go and payment holidays
in this period of short term unemployment off the back of COVID-19.
So I think all in all what we're going to see is certainly not 10% growth, but I don't
think we're going to be seeing 20% or 30% declines either.
It's going to be somewhere in the middle of lower volume.
Zara: That's good to know a little bit of security, I guess, or reassurance for some of the homeowners
out there.
But when it comes to their current lenders, are we seeing the rates...
So the RBA obviously dropped to historic lows, unbelievable low.
Are we seeing all the lenders passing that on?
Is it some?
Should people be thinking about whether or not they've been given that full cut in their
interest rate?
David: Yeah.
Really good question.
So the RBA has put out this facility and most banks and lenders in the market can access
it.
There's a slightly nuanced version for non-banks.
It's a facility nonetheless, but slightly nuanced to the $90 billion facility that ADIs,
or authorized deposit taking institutions, are able to access.
But really the message to people is this facility has been put in place to really cushion the
economy and it's a relatively blunt object.
There's not a lot of restrictions and the way it's been implemented across most of the
banks has been relatively consistent in that they've brought out incredibly low rates.
We've seen fixed rates as low as 2.09% and when you take it a step back and reflect on
how low that is, most major banks and even the challenger banks were in the mid three's
only 12 months ago.
David: So if you're one of the lucky few that still has your job and you haven't been put
into stress through COVID-19 there's never been a better time to look at refinancing.
And in particular the Lendi platform's been built in a way that you can do that from the
comfort of your living room or your home office or your dining room tables depending
on where you're working from.
We've never seen rates this low and the impact to your back pocket is pretty substantial.
Zara: Yeah.
So with that in mind for those Aussies who have faced some difficulties, maybe they've
been stood down or lost a job, is there any recommendations or suggestions that you have
for them during this difficult period?
David: Yeah.
So I think one of the things that's been really good to see has been a really coordinated
response from government, from the ABA, which is the industry body that represents the banks
as well as the banks, which is saying to Aussie households like, "We've got you."
This is an unprecedented time and there will be a number of short term job losses.
When we look at what you should do, I think there's a few different options available.
Firstly as a person with a mortgage, if you have lost your job, the first thing you should
look at is what can you do in your own monthly budget to continue paying your mortgage.
I think while there's options around hardship or payment holidays and you know you can fall
back on those, you will ultimately, unless you're able to convince your lender to stop
charging you interest, you'll ultimately end up paying more over the life of the loan with
one of those.
David: So the first step we'd recommend is firstly, make sure you're on the best rate.
As I said, most of the banks have come out with 2.09, 2.19, 2.29% rates.
If you're not on a rate that starts with a two and in that range you should be either
switching or refinancing to one of those products full stop.
If you still can't afford to pay your loan on one of those lower rates, you can look
at going on one of these mortgage holidays or applying for hardship.
The banks are very well set up to do it.
They've all come out and said that they understand this is unprecedented circumstances and people
wouldn't have planned for this.
So they've all got a process and depending on the bank, it's either a three month holiday
with a review at the end or a six month holiday.
So if you're not sure how to do that, Lendi's got home loan experts that can help you or
you can go directly to your bank and it's a relatively easy or straightforward process.
David: In addition to that, it's also time you should look at all of your other expenses
and really create that monthly budget if you haven't got one.
And as you have with the bank look to speak to those other suppliers around, whether it's
the energy company or the telco, everyone understands that these are difficult times
for all Aussies and don't feel embarrassed by it.
There's hundreds of thousands of other people going through the same thing.
Zara: Absolutely.
I think that's some really great advice for everybody out there.
So that's lots of really helpful information.
But one question before we wrap up is what are your predictions, I guess, for the wider
housing market in 2020?
David: Look, I don't have a crystal ball.
I think what is certain is we've seen an unprecedented amount of stimulus.
If we look at what's been announced over the last four weeks it exceeds materially what
was done by the government in the global financial crisis.
So the amount of money flowing into households, whether it be through the JobKeeper payment
or the JobSeeker payment or through free childcare as announced last week, all the other stimulus
measures, is unprecedented.
David: And what that means for all facets of the economy is what...
Ultimately what's happening is for a short period of time, the economy is moving into,
to use the term that Scott Morrison used, into a hibernated state.
Lots of parts of the economy, whether it being travel down by 100%, other areas will be down
by 75% and some are less impacted.
But for a short period of time, a large amount of the economy is going to be in this hibernated
state.
And what that really means is this stimulus is in place to really cushion the fall.
David: And so all we can really say is that stay at home, help flatten the curve, keep
the social distancing measures up and if all Aussies do that, we should be in a position
where this period is shorter rather than longer and things will return back to what's ultimately
going to be a new normal on the other side.
But there will be another side and that that other side the fundamentals of this economy
aren't going to change, that lots of wealth is tied up in housing.
Housing prices will rebound and demand and supply will rebound.
And I think I can only underscore again the importance of refinancing in a time like this
and putting that money back in your pocket.
Zara: I think that's really great advice.
And what a nice optimistic view of the future.
I'm in your camp and hopefully with all of us working from home, we'll flatten that curve.
Well thanks so much Dave for taking the time.
I know it's really busy time, but I think these are really important issues and hopefully
everyone out there found this useful.
As I said, we're going to be providing these updates more regularly.
If you have any comments or suggestions or topics that you want us to cover in these
updates, then make sure that you add that to the comments section below.
We'd love to hear from you or subscribe to our channel and hit that little bell thingy,
you'll get notified whenever we update new content, I'm told by my tech people.
Zara: We've also got a whole bunch of other videos on here.
If you want to have a little skim through, we've all got a little bit extra time for
the old YouTube these days, so here's a couple of really great topics.
So how to refinance your home in five steps or something that might be even more topical
is five steps for negotiating a better interest rate yourself.
But as I say, Lendi is open for business, lendi.com.au.
We've got experts on hand who can talk if you have additional questions or questions
more specific to you so check that out.
But otherwise, thanks Dave, everyone and we'll see you next time.
David: Thanks for tuning in.