Welcome to our quarterly review of interest rates in Australia. In our update we talk about should you fix or float right now, where the banks stand over principal and interest or interest only, what the banks are looking for when you are borrowing, where interest rates are at and is it a good idea to refinance at this stage in the market.
A great time to invest in property is right now!
With APRA (Australian Prudential Regulation Authority) removing the cap on investment lending, competition is heating up once again.
Even with the handing down of the Royal Commission which has seen lending policies remaining strict (especially among the major banks), investment loan rates are lower than they have been in previous months.
Banks tend to be concerned about protecting their brand, especially in light of increased regulatory parameters from the competition watchdog.
Non-bank lenders tend to be a little more customer focussed, with Firstmac being voted Australia’s Number One non-bank lender recently. Non-bank lenders are really coming to the fore of people’s minds.
Many brokers also, see non-bank lenders as a more viable option.
So, fixed or variable interest rates in Australia? Which one fits best?
With 3-year fixed rates currently as low as 3.49%, fixing is worth considering if you’re not planning on moving or selling soon.
Principal and interest or interest only? Which one suits you best?
Most banks still prefer principal and interest home loans over interest only, especially for owner-occupied properties. But with the removal of the interest only limits, more lenders are willing to consider this option, provided it is still in the best interests of the clients.
As for investment loans, more and more lenders are offering competitive rates and terms up 10 years for investors. However, banks are applying tougher criteria to investment loans compared to owner-occupied home loans which mean that lender choice is critical.
Living expenses on the lender’s radar, now more than ever!
Another “fall-out” of the Royal Commission has been the increased scrutiny and assessment of living expenses.
Reducing your spending at least 3-6 months before applying for a mortgage can really improve your options, and see you succeeding when you realise where those “just a few dollars” saved can lead to.
Specialised budgeting strategies, coupled with reducing overall limits on credit cards are just two ways to ensure a positive outcome. Understanding that an unsolicited increase in your credit card limit by your provider is actually not a compliment!
When you talk to people about their perception of the banks, most people say they would rather support a “smaller” lender.
Most people are disgruntled with the massive profits the banks consistently post.
Conversely, most customers will still choose a major bank over a smaller lender, even if that lender is offering a much sharper interest rate!
Much of this psychology has to do with the old adage of “too big to fail” and a misguided belief in the instability of second-tier lenders (driven, in part, by the majors!)
As mortgage brokers, we deal with many lenders on a daily basis and we continually challenge this belief, and in challenging this belief, deliver positive outcomes for our clients.
We find that non-bank lenders are very sophisticated in the way they do business, their rates are often lower, and their online platforms are very innovative, making it easier for borrowers to manage their home loans.
The easiest way to qualify for a home loan
Lending policies and interest rates in Australia have changed a lot over the past few months as banks react to regulatory changes and take a closer look at their loan books.
However, a mortgage broker can help you cut through the noise and find a lender that can offer you the right home loan for your needs and at a sharp rate.
Using your mortgage broker simply makes sense and is the easiest way to qualify for a home loan!
Interest rates in Australia over-view
This month, some of our lenders have announced some exceptional interest rate discounts.
• Home loan: From 3.55% (comparison rate 3.67%).
• 5 years fixed: From 3.79% (comparison rate 3.80%).
• Investment loan: From 3.89% (comparison rate 3.98%).
• Home loan and investment loan (combined): From 3.69% (comparison rate 3.84%)
Naturally – conditions apply!
Is this a good time to refinance?
Consider refinancing if you meet these criteria
• You owe less than 80% of the property value.
• Your loan is variable (not fixed).
• Your loan is over 2 years old, otherwise, a short-term loan fee may apply.
There are some incentives to refinancing too …
Some of our lenders will pay you up to $3,500 to refinance your mortgage with them!
Other lenders are even currently offering $2,000 per property security that you refinance. Essentially, you could receive up to $6,000 if you refinance three properties! Conditions apply, so best to talk to us personally.
…and here are the reasons why lenders are offering you these incentives!
After the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, lenders have seen a drop in their home loan volumes.
Basically, demand for home loans is currently lower than usual, so lenders are offering huge rate discounts to get your business.
We expect there will be more first home buyers entering the market considering these lower interest rates in Australia, downsizing and upsizing too will be on the increase, as will savvy investors keen to take advantage of the sharp rates on offer.
So, what does this all mean to you, our valued clients?
It’s a given that people’s circumstances will change, legislation will always change, and the market constantly changes.
Broker’s expertise and ability to not only remain up to date but as importantly, ensure their clients are kept well informed in response to change continues to provide consistency during these challenging times.
Brokers really do make the complex, simple!
This is what drives us here at Power House Financial Services, where we will always strive to keep the Power in your hands. Whether you fix or vary your home loans, rest assured, through our proven strategies, our continuing research and monitoring of the market, we will always endeavour to offer you competitive home loan products in this ever-changing market, to best suit your individual circumstances.
We are with you for the long game!