I am personally sick to death of The Royal Commission into Banking but I can tell you it is being used as an excuse for all manner of lending rejections from banks. There is no doubt lenders are using this as a reason to hike interest rates and reduce available credit but one wonders how long before this changes, as profits have to be maintained.
However, one point of interest which lenders are now very particular about is living expenses and how much you “actually” spend to live. Previously, the minimum expenses identified by the HEM – which is the Henderson Poverty Index (created by the Melbourne Institute) were used as the benchmark for borrowers’ living expenses. Now, at least three months of your savings accounts and credit cards are reviewed to show how much you REALLY are spending. So think about this before applying for credit as careless spending can cost you a loan.
Another important thing to note is it appears that banks have been learning from their insurance arms and wait for you to auto renew your loans which means they will roll over your interest only or principal and interest loans to simply keep them longer than two years, and then up goes the interest rate! Yet at the same time offering much lower rates for new to bank lending.
Some lenders are offering as much as $2000 to get new clients refinancing to them and all the major banks are offering incentives. Clearly this fee is priced in somewhere and while it is good to get it now, make sure we can refinance you later as it appears you need to either fix and lock in lower rates for a couple of years or you will be paying for those incentives later.
We are working hard in the background to check the current interest rates of all our existing clients and to reduce them when we can, but if you feel your rates are not working as well as they could be, please give us a call and we shall happily reassess your situation and work to get you a better deal. We have some fantastic rates out there at the moment, particularly from second tier lenders, who seem to work a lot harder to look after their clients, once they have got them.
It is also clear that mortgage brokers are offering a great conduit for clients to offer more choice and better alternatives. Daniel Oh from Connective Legal says “Based on our observations of the industry and the additional improvements recommended by the Combined Industry Forum, neither Treasury nor ASIC have advocated for wholesale change to the remuneration structure for mortgage brokers. Ultimately, the current structure works better than any of the available alternatives.”
With over 55% of loans now done by brokers, see below a report on what mortgage brokers actually offer to the Community.
If you would like to discuss any of this further, please call me on 0412 709 200.