We’ve been busy! It has been a while since the last article as we’ve had a heap going on; a host of clients making new purchases & refinances, moving offices and racing cars!
Today we’ll provide a quick update on how we’re seeing things in lending.
The RBA continue to keep rates on hold, and by virtue of their commentary it appears that they will for quite some time. However, we are seeing more lenders move rates independently. For a while now there has been commentary that the cost of funds is increasing, driven predominately by the rising cost across international markets as a result of the US Federal Reserve lifting their rates.
Generally speaking it is the smaller lenders which this impacts more as they are more exposed to this than the larger lenders / major banks. We have seen recently this play out with notable lenders like AMP and Macquarie raising rates across all types of residential lending, and ING increasing rates for existing lending.
That said, there are still some outstanding rates and deals the likes of which we won’t see again in our lifetime.
Fixed Rate Opportunities
With uncertainly around where rates are heading now is a good time to consider a fixed rate. The 2-3 year fixed rate is a very competitive space at the moment, but this is likely only going to last a short period of time and will be the first transparent sign that the majors are following the smaller banks in raising their rates. At the time of the article there are lenders with owner occupier P&I 2 year fixed rates as low as 3.72% and 3 year at 3.83%. For those really looking for certainty to weather the short term the same lender is offering a 5 year fixed rate at 3.98%.
Of course there is more to consider than just rate when looking at fixed products – you will need to ensure that you do not have any potential circumstances within the fixed period that might mean you need to sell or change things and incur significant break costs. Or at the very least you have a plan to mitigate these risks.
There are also options to split your loan as a combination fixed / variable product which can give you the predictability of fixed, with positive exposure to the low variable rates as you build funds in an offset account. We see many taking advantage of this structure.
More lenders have introduced more stringent requirements around capturing information on lenders. The Royal Commission has prompted more scrutiny around financial services and in particular with mortgages ensuring that lenders are meeting their requirements as part of responsible lending. For those looking to borrow, this is playing out in two different ways.
Firstly for any applications, this means we need to ensure that you disclose all required information up front as part of your application – particularly in relation to your true living expenses, and having the required documentation and evidence of this for the lender.
Secondly, these higher levels of vigilance and paperwork slows the process down with the lender. Assessment teams need to seek sign off from senior credit holders more often and will ask more questions to substantiate an application. This slows down service levels, as an example with one lender usually 2 business days for an application moving out to 5 business days. This means an application can take longer, so if you’re eyeing off a property to buy at an upcoming auction it is best you get prepared early to ensure you’re pre-approved before purchase.
The Property Market
There is no doubt within Sydney & Melbourne in particular things have cooled from the peak. Without going into data, clearance rates are way down and the market has gone from buyers acting with urgency to being more picky. Quality properties are still going for great prices, but where there are compromises with individual properties this is resulting in lower levels of interest and lower prices. In some instances, vendors still have high price expectations and these remain unmet with inventory sitting on the market for quite some time.
This creates some great buying opportunities, and we are seeing plenty of people take action as a result. From first home buyers to investors continuing to build their long term portfolio. As we approach spring I would anticipate a heap of listings hit the market and provide another good opportunity for the market to be tested, and bargains to be had!
Please note the above is all opinion only and does not take into account your personal circumstances. You should seek independent financial advice, and certainly in the case of finding out how you can capitalize in the current climate get in contact with us!
We’ll miss the view from our old office…..