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Home owners, faced with soaring prices and rising interest rates, are increasingly looking inward, to the equity they have already built, to fund their next move.
This trend, a blend of strategic refinancing and ambitious renovating, is being driven by what brokers are calling “affordability pressures” and “serviceability walls”.
The team at Home Loan Experts unpacked these trends, leaning on a mix of data and client interactions.
Instead of battling a heated and expensive property market, Australians are choosing to improve the home they’re in or use its existing value to build their portfolio.
Broker Sid Bajracharya said: “The trend of renovating and relocating is still strong. With affordability stretched and many feeling rate fatigue, loan increases and equity releases continue to be a smart strategy considered by the clients.”
This approach is particularly popular among owner-occupiers who would rather upgrade their current home than sell and re-enter the competitive market.
The goal is twofold: either to create their dream home or to access equity to prepare for an investment purchase.
A key driver of this trend is the tightening of credit policies. Even high-income earners are finding it difficult to pass the stringent serviceability assessments required for a new loan, which test a borrower’s ability to repay at a higher interest rate.
“I’m also seeing more clients with strong incomes but serviceability constraints under current buffers. So, serviceability calculation with specialist lenders, to capitalise on, say, a 2 per cent buffer or 1 per cent buffer, is also on the rise,” said Bajracharya.
“It highlights the need for brokers to structure files properly and educate clients early, especially when they are going with specialist lenders.”
This highlights the growing need for expert advice. Brokers are essential in properly structuring applications and educating clients early, especially when navigating the landscape of specialist lenders.
Bajracharya also warned that as demand for these services rises, “lenders are getting slower,” with increased turnaround times for loan processing.
The silver lining in Australia’s property market has been the rise in home values, which has built a substantial pool of equity for existing home owners. This equity is becoming a powerful financial tool.
Manish Rana, another Home Loan Experts’ broker, noted: “Rising values mean growing equity, opening opportunities for refinancing, equity release for renovations or upgrades, and investment purchases. Many homeowners are also using bridging finance to sell and upgrade smoothly.”
He also pointed to the use of bridging finance as a popular method for home owners to sell their current property and upgrade smoothly without the pressure of a direct chain.
This was echoed by fellow broker Jenish Manandhar, who has witnessed “greater interest from the clients in doing the renovation and equity release to be better prepared for the future.”
According to Otto Dargan, founder and CEO of Home Loan Experts, this shift represents a strategic adaptation to a tougher economic climate.
“Australians are adapting to a tougher credit environment by looking inward. Instead of stretching for that next property, they’re unlocking equity to renovate, refinance or reposition. It’s a smart defensive play, and the rise of specialist lending tells us that even high-income earners are running into serviceability walls,” he said.
In a market defined by its challenges, Australian home owners are demonstrating resilience and ingenuity. By leveraging the value they already hold, they are finding smart, sustainable ways to achieve their property goals without overextending themselves.
[Related: Brokers remain proactive in refinancing loans]
