I can see there is a lot of uncertainty in the world right now as a result of the COVID-19 outbreak.
From a finance and lending point of view there is a heap of noise and some real inaccurate information circulating so I thought I’d share my view on things in the hope that it’ll help someone.
Please note as always that this is a general update and opinion only, not financial advice. If you’d like to discuss your specific situation please get in touch.
1. Interest Rates
I’ll start with the good news. We’ve seen a significant amount of change this month with interest rates. The RBA have cut rates by 0.25% at the start of March and again at an emergency meeting last week by another 0.25% The first cut was passed on by pretty much every lender in the market so for variable loan holders you should see that by end of month if not reflected already.
Unfortunately on the second cut, for existing mortgage holders it does not look like most lenders are passing this on but rather the banks will be deploying discounts in other areas like commercial lending to try and keep the economy going.
Many have decreased fixed rates though which may be an option for some who are looking for certainty in this uncertain environment, and these new fixed rates are as low as 2.19% for 2 year owner occupied fixed. Will it get much cheaper? Hard to say, as to be honest I never imagined it’d be this low!
2. Economic Impacts – Contingency Planning
If you’ve paid even a little bit of attention to the stock market then it is clear that there is an economic fallout from the virus. It is likely that we are all going to feel the economic effect in some way, and this is going to be different for everyone.
For those fortunate enough, this will be a great opportunity to build wealth. For many however, this will unfortunately mean for some jobs will be lost and the ability to repay mortgages will be compromised.
It is prudent to make sure you have measures in place to prepare for the potential worst case scenarios . Examples of this may be having a cash buffer in place, making sure you have landlord insurance (for investors) or income protection insurance.
In practical terms we can help with things like refinancing to lower and/or fixed rates, moving to interest only repayments, releasing equity for buffers, or consolidating other debts with high repayments.
If you think you may need to make some changes please don’t hesitate to get in touch to discuss your specific details and we can work through options.
3. What if things go wrong?
If you do find yourself in a position where things do go wrong the most important thing from a financial perspective is to take immediate action to ensure that you do not go into default by not being able to repay your mortgage.
Each lender works slightly differently when it comes to hardship, but all will have provisions and be able to provide options if you are facing financial difficulties. For instance they may be able to offer you a repayment holiday, interest only repayments, extend the loan term, or capitalise overdue repayments.
There is lots of misinformation on social media around “repayment holidays” and that nobody needs to make repayments for 6 months. That is not the case. This is not something that you can opt into unless you’re facing financial difficulties. You also only want to go down this line if there are no other options as it may affect your ability to borrow longer term.
I would suggest if you find yourself in this position it is URGENT that you contact me and I can help you try and navigate options as soon as possible.
Again, I am here to help and more than happy to answer any questions you may have about the above or your specific concerns. Stay safe everyone!