Kelvin Davidson: CoreLogic Chief Property Economist believes a change in home loan borrowing habits is occurring

There's anticipation more homeowners will change their borrowing behaviour this years.

90% of home loans were floating or fixed for less than a year in January. 

But CoreLogic forecasts borrowers will fix for longer as interest rates come down. 

Chief Property Economist, Kelvin Davidson told Francesca Rudkin it's anecdotal at this point, but believes February data will prove it's happening. 

He says there was intense competition between banks last month, for two and three-year fixed term rates. 

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Episode Transcript

Speaker 1 (00:00):
Core Logic is forecasting borrowers will fix for longer as
mortgage rates come down. Ninety percent of home loans we're
floating or fixed for less than a year in January,
but as rates get more affordable, homeowners are fixing for longer.
Core Logic Chief property economist Calvin Davidson is with us now.
Good morning, Calvin, Good morning. So you're seeing evidence of
this that people are fixing for longer.

Speaker 2 (00:22):
Yeah, it's anecdotal at this point. We don't actually have
the hard figures on it. I'm expecting in a couple
of weeks we get February's data from the Reserve Bank,
I'd expect that I'll probably start to show that trem because,
of course, in February we saw some pretty you know,
pretty intense competition re emerge that those two and three
year horizons, those fixed rates, the Bank's really got competitive

(00:45):
for those rates in February. So once we get their data,
I think we'll see it in the facts. But right now,
saving the anecdotally hearing from people that those two and
three year rates are starting to get more popular again.

Speaker 1 (00:57):
So when do you expect we will see a solid
switch to long fixing.

Speaker 2 (01:02):
Well, I mean, I think it could happen fairly quickly
and once once you're start to get those two and
three year rates below five percent, that's getting pretty appealing,
and particularly with the uncertainty around the world with various things,
people might just be starting to think, Okay, I wouldn't
mind some certainty over that two or three year period.
So I mean, no guarantees. We've seen a lot of

(01:22):
popularity for those shorter term fixes lately and may not
shift overnight, but you can certainly see the appeal of
those rates below five.

Speaker 1 (01:31):
Percent, the low rates, the competition. What impact will this
have on the property market.

Speaker 2 (01:37):
I mean, well, we're already seeing the property market more
generally start to turn around. It's it's fairly slow progress,
and it's been a pretty deep downturn. It's it's been
quite prolonged. But we've seen before the impact that lower
mortgage rates can have, and I think that's starting to
come through now. We've seen sales rising for probably a
year or so. It's been it's been slow and from
a low level, but sales are rising and we still

(02:00):
house prices start to take up again in February, so
I think we're seeing that evidence now but the game,
there's probably reason for a restraint because at the same time,
there's still a lot of less things. The economy is
still a bit weak, there's a restraint in terms of
so debt to income ra share restrictions from the reserve banks.
So there's support effectors, but also things that are restraining

(02:22):
the market too.

Speaker 1 (02:23):
And is it benefiting or encouraging investors.

Speaker 2 (02:27):
Yeah, we're definitely seeing investors coming back. That's been a
trend for probably about nine months now. They reached to
trough in terms of their bucket share at least about
sort of April May last year, and then since then
the text rules had gone a little bit easier for investors,
and of course mortgage rates had come down, so that's
really helping to reduce those top ups that most investors

(02:50):
would require for a new rental purchase, so in other words,
topping up the cash flow from other sources of income.
As mortgage rates come down, those times ups come down,
and so yeah, there's evidence that investors are coming back
as those cash flowers improve. So I think probably a
busier year for investors this year too, Cavin, Is.

Speaker 1 (03:10):
This a sign that interest rates are about as low
as they're going to get for the next few years.

Speaker 2 (03:15):
Well a million dollar question, ayes. Yeah, and you know
there's no financial advice or anything here, but I mean
we've I think we probably have seen the biggest falls
and mortgage rates from his face that they've come down
pretty sharply in a recently short period of time, and
they're not they're very unlikely to go back to those
those COVID levels. So yeah, I mean, once we start

(03:37):
to get rates in that four and a half to
five percent kind of range, which is what we've got now,
you'd have to think that's getting fairly close to the bottoms.
So yeah, so big decisions for people.

Speaker 1 (03:50):
Thank you, Calvin, appreciate your time this morning. That was
Calvin Davidson, Core Logic, chief property Economist. For more from
Early Edition with Ryan Bridge.

Speaker 2 (03:58):
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