Good morning and Happy Tuesday!
Another busy week in the world of money. There were several articles I read this week around deferred repayments on clients home loans that continued to stun me. One article in particular about CBA stated that they have 8% of their loans on deferment or $14 billion. On the flip side of that though their home lending rose by 1.3 times the average, with home loan arrears sitting at low levels. The article also stated that 40% of CBA home loans were a year or more in advance on their repayments.
Dr Phillip Lowe the RBA’s governor was also in the news this week, supporting stamp duty being scrapped as part of greater tax reform. He also appeared before the parliamentary standing committee on Friday to discuss it’s current monetary policy and the state of the nation in general economically. His speech to parliament is here
Another lender this week has decreased it’s DTI or debt to income ratio from 8 to 6. Noting further uncertainly in the job market, now also requiring more detailed notes around borrowers income and expenses. I think in the coming months that this new DTI ratio will become more normal. Lenders are increasingly becoming more forensic in borrowers expenses. I didn’t think this was possible but it is happening on a much more regular basis. I think that regardless of interest rates this will become the new normal.
I had clients come to me several weeks ago looking to buy their first home. After meeting with them and discussing strategy for the coming months before they commit to buy. The clients sent me an email with questions around interest rates. Their scenario was a high LVR borrow at 95%. Borrowing at this level means that a bank will usually place a higher interest rate. We were looking at rates in the high 2’s for a baseline as well as to give clients an idea about stressing the rate. I am never a big fan of showing a client the lowest rate and using that as the baseline.
At the end of last week the client sent me an email asking about rates, asking why I had quoted such high rates and gave me a link to Mozo…Comparison websites can be a great tool. They do sometimes lack some transparency though. The link the client sent to me was a sponsored article (this wasn’t very clear) on Australia’s cheapest home loans The things here was that the lenders shown were ALL promoted and it wasn’t until you dig deeper into the article that you find that all of the rates quoted had LVR restrictions of 80% the banks shown had a mix of variable and fixed rates. No wonder borrowers are confused! Yet another reason why seeing a mortgage broker makes sense.
We have in the last week or so started to see some variable rates start to drop again with rates from Bank SA on a variable loan up to 95% LVR inc LMI at 2.64% on a basic loan, St George and Bank of Melbourne are at 2.69% on their basic loans at the same LVR. Great news for first home buyers who want a simple loan set up. Rates don’t drop again here until you get below 80% with the Teachers Mutual group at 2.55% on their basic variable.
I hope you all have a fantastic week out there. If you need a hand with a scenario or a property report please let me know.
JC
Scenarios and interest rates quoted above are suggestions and constitute general advice only.
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