Rate cut will encourage first-home buyers and investors: Mortgage Choice CEO Michael Russell

Despite the spate of headlines forecasting further property gloom, Mortgage Choice CEO Michael Russell says a record level of mortgage pre-approvals indicates that there is “patchy pent-up demand”, with a rate cut likely to spur many sitting on the sidelines back into the market.

Russell says mortgage pre-approvals have risen over recent months, particularly among first-home buyers.

“There are lots of people on the sidelines who are still waiting for a lower entry price – for the market to bottom out – and another cash rate reduction,” he says.

“Another cash rate cut either next week or in February will make property irresistible for investors and stimulate the market.”

Aside from the increase in pent-up demand, Russell says industry-wide home loan approvals have picked up in five out of the last six months.

Having bottomed out in March at around $19 billion from a high of around $24 billion at the end of 2009 (helped out by the first-home owner boost), Russell saysindustry-wide mortgage approvals have now climbed back up to around $21 billion a month.

“My feeling in terms of momentum for the market is one of optimism and confidence,” he says.

And despite the media attention on what is happening globally and in particurlar in Europe, Russell says consumers are not that concerned about macro issues.

“Speculators – those that buy off the plan and look to flip the property at settlement for profit – have lost their appetites for property.

“But investing in property is not about making a short-term investment, it’s about investing for seven to 10 years.”