Commonwealth Bank predicts the upcoming spring buying season will not only see the return of the investor, but be the most digital on record. So what does it all mean for first homebuyers who face affordability challenges?

According to new CommBank data, customers are now – more than ever before – seeking out information and engaging with their home loan via digital tools and interacting with their lender or broker via digital channels.

Dr Michael Baumann, Executive General Manager of Home Buying, said: “Restrictions around movement and face-to-face meetings as well as COVID-19 induced policy changes around government processes has meant the home buying process has become increasingly digital.”

Approximately 90 per cent of CommBank’s property transactions are now settled online, and the usage of DigiDocs – a new process that replaces paper contracts – has increased 2,000 per cent since July 2020.

Customers are increasingly interacting with their home loan via digital tools, with approximately 370,000 CBA customers checking their home loan balance or interacting with the content and tools in the ‘Manage my loan’ functionality in NetBank an average of 26 times a month, which is an increase of 13 per cent year on year.

The bank has also seen approximately 5,000 customers use its digital splitting tool to split, switch and fix their home loan since the tool launched in April 2021.

To address this shift in customer behaviour, Commonwealth Bank has launched a new Home Buying Hub in the CommBank app. The Hub helps guide customers digitally through every step of the home buying journey to make the complex feel simple and easy. In only a few weeks since launch, approximately 3,000 customers have used the Hub, with roughly one in every five customers re-engaging multiple times.

The Hub provides customers with easy access to lender details and pre-approval letters, it also prompts customers when their conditional approval is about to expire. Further, the Hub offers a series of checklists to help customers throughout their purchase journey; including working out upfront buying costs, when to engage a solicitor or conveyancer, and arranging a property inspection.

Return of the investor

Ideal conditions, including the current low rate environment, will see investors return this spring buying season.

The percentage of mortgage approvals for investors climbed to 29.4 per cent in July this year, up from 23.0 per cent in October 2020. Meanwhile, investor system growth increased 2.9 per cent over the last 12 months from -0.6 per cent in July 2020 to +2.3 per cent in July 2021.

“The current low rate environment is attractive to investors seeking a higher yield on their investments. The huge injection of government stimulus into the economy over the past 12-18 months will also see some investors who fear inflation invest in property which will further increase the investor mix of new approvals,” said Michael Baumann.

While first homebuyers started the first half of the last financial year strong, peaking at 18 per cent in December 2020, the proportion of first homebuyers had dropped to 12 per cent by year’s end. Looking ahead, first homebuyers face the challenge of rising property prices, with house prices up 18 per cent in the last 12 months and no signs of slower growth ahead.

“As we enter the spring buying season, there are affordability challenges for first homebuyers, however, availability of spots via government homebuyer schemes will alleviate some of this stress.

“Commonwealth Bank is one of only two major lenders to offer loans under the Government’s First Home Loan Deposit Scheme, New Home Guarantee and Family Home Guarantee schemes and since new spots were released on 1 July 2021, we have seen strong demand from customers, particularly customers applying for the First Home Loan Deposit Scheme.

“Pleasingly for buyers there are still spots remaining under the Family Home Guarantee and New Home Guarantee schemes and we encourage customers to contact their lender or broker about applying,” commented Dr Baumann.

Tips for first homebuyers

  1. Understand and budget for your upfront costs – in addition to your deposit, there are other costs you’ll need to factor in including stamp duty, bank fees, inspection, agent fees and legal fees.
  2. Consider the different sales processes – there are different ways you can buy property so it’s important you ask your lender or broker about how you should prepare for an auction versus a private sale.
  3. It’s not just about rate – spend time understanding the features of the different home loans to see if it’s right for you. For example, CommBank offers home loan customers an ultra-low rate Green Loan to help finance improvements such as solar panels or a battery. This exclusive feature can help save money on electricity bills and reduce your environmental impact.
  4. Conditional approval is just that – it’s important to remember that conditional approval can help you search and pursue properties with some confidence, however it’s only an indication of what the bank may lend to you and the final offer is conditional on a number of final checks.
  5. Find a solicitor or conveyancer – they will help with the contract and other legal documents. Ask your lender or broker about Home-In, CBA’s digital conveyancing tool, which will help coordinate all the steps and communication between your solicitor and lender.
  6. Inspect – make sure you do your due diligence on a property and the surrounding area, including visiting at different times of the day. Use online viewings and tools to help overcome any COVID-19 restrictions. Finally, be sure to inspect your purchased property prior to settlement to avoid any surprises.