Increasing numbers of mortgage holders are refinancing to make improvements to their properties, according to a leading mortgage broker.
Loan Market Group Executive Director John Kolenda said home owners were looking to borrow amounts of between $20,000 and $100,000 for renovations.
“We are getting a significant increase, as much as 50 per cent in some areas, in the number of people seeking to refinance to do minor home improvements,” Mr Kolenda said.
“It’s the major trend we have noticed in recent months as activity in the residential property market has slowed slightly during the winter.”
Mr Kolenda said home owners making improvements to their properties now could be looking to sell when the residential real estate market picks up, with spring traditionally a popular time for vendors to put properties up for sale.
“At times when people are reluctant to sell they will often consider renovating to enhance and prepare their properties for the market when it is on the rise again,” he said.
Mr Kolenda said most of the activity in the residential real estate sector during the first six months of 2009 was dominated by first home buyers taking advantage of the boosted First Home Owners Grant (FHOG) and near record low interest rates.
“Inquiries from first home buyers have steadied and they are even down in some markets from what we saw earlier in the year,” he said.
“We are now starting to see more interest from investors instead. The rental market is still strong and with limited properties available higher than expected rentals are being paid.”
Mr Kolenda said lower interest rates ensured there was potential for good returns and cash flows for property investors.
“All the indicators are ideal for investors to return to bricks and mortar,” he said.
“Given what has recently been happening in the sharemarket, investors are starting to view property investment as a great long term opportunity to create wealth.
“I also believe it is a good time for existing home owners to upgrade now as the buyer can secure that next big financial commitment and, if they choose, lock in a reasonable fixed interest rate.”
Mr Kolenda said another reason for reduced first home buyer activity was due to lenders looking to borrowers to show genuine savings prior to granting loan approvals.
“First home buyers are finding the rules for securing finance have changed, such as the requirement for a higher loan to valuation ratio (LVR) being applied by lenders,” he said.
“A mortgage broker is best placed to assist people considering home ownership about accessing the FHOG, finance approval and also in assisting with budgeting and saving.”