Great time to be a borrower
Home loan rates have hit all-time record lows. The property market is showing signs of recovery. Regulators have eased home loan eligibility guidelines. Lenders are competing hard for new business. In short, conditions look very good for borrowers and home buyers right now.
More people can now qualify for a home loan
The big four banks and many other lenders reacted quickly to the banking regulator’s cut to home loan serviceability guidelines in July.
The Australian Prudential Regulatory Authority dropped the requirement for all lenders to assess mortgage applicant’s ability to repay their loan against an interest rate of 7.25 per cent p.a. (minimum).
Lenders were required to add two per cent ( a buffer ) to the rate of the home loan being applied for, then ‘test’ the applicant’s ability to make loan repayments at the higher rate or 7.25 per cent p.a., whichever is greater.
Now lenders can lower the minimum rate below 7.25 per cent p.a. but must still add a buffer rate to test applicant’s ability to repay their loan if rates rise. Most lenders’ buffer rates are now either 2.25 or 2.5 per cent.
Macquarie Bank reacted by moving its minimum serviceability floor rate to 5.30 per cent p.a. ANZ, NAB and Suncorp have moved down to 5.50 per cent p.a.
Commonwealth Bank, Westpac, Adelaide Bank, Auswide and others have moved their minimum rate to 5.75 per cent p.a. Bank of Sydney have moved to 5.85 per cent p.a.
The change means that, for example, a borrower applying for a Macquarie Offset Home Loan which has a current variable rate of 3.24 p.a. (comparison rate 3.50 per cent p.a.) will now be assessed on their ability to repay the loan rate plus Macquarie’s buffer rate, which is 2.5 per cent. That makes Macquarie’s Offset Loan serviceability test rate 5.74 per cent p.a. (3.24 + 2.5).
That is lot lower than 7.25 per cent p.a. and means getting a home loan is now open to a lot more people.
Melbourne and Sydney lead property market turn-around
After almost two years of negative property news and big price falls in most Australian capital cities, Australia’s property market outlook is finally improving.
Home prices actually went UP (slightly) over the last three months in Melbourne, Hobart and Canberra. In Sydney the property price slide looks to be slowing up with prices falling just 0.4 per cent over the last three months according to the latest monthly property price data from Domain. That’s a lot more positive than price falls of almost ten per cent over the last year in Sydney.
Nationally, median home prices in Australia’s capital cities are flat, and that may indicate the end of the downturn is in sight.
Home loan rates have never been so low.
The big four banks are cutting package loan rates under four per cent p.a. and smaller lenders are slashing variable and fixed rates to under three per cent p.a. Lenders can no longer charge exorbitant exit fees on variable rate home loans so switching is cheaper and easier.
“The fees involved in refinancing have come down a lot in the last few years and lenders are actively competing for business,” said InfoChoice CEO Vadim Taube.
“There are now so many lenders offering variable headline home loan rates under four per cent it really is the perfect time to look at your mortgage and find a deal that could save you thousands of dollars.
Package loan rates slashed
Westpac has cut the variable rate on the Rocket Repay (Premium Advantage) mortgage loan from 4.98 per cent p.a. to 3.69 per cent p.a. (comparison rate 4.09 per cent p.a.) for owner occupiers paying principal and interest, by increasing the package deal discount.
Commonwealth Bank’s variable home loan with wealth package discount (O.O. P&I) is currently charging 4.43 per cent p.a. (comparison rate 4.84 per cent p.a.).
NAB’s National Choice Package ($250,000 to $749,999, P&I, O.O.) rate is 4.07 per cent p.a. (comparison rate 4.47 per cent p.a.).
ANZ’s Breakfree package offers a 0.60 per cent discount. For P&I O.O. packaged loans between $250,000 and $699,999 ANZ is charging 4.58 per cent p.a.(comparison rate 4.97 per cent p.a.).
Fixed loan rates slashed
There are now plenty of fixed loan rates under 3 per cent including Reduce Home Loans’ ‘Dream 3 Years’ loan which is charging 2.97 per cent p.a. (comparison rate 3.14 per cent p.a.) and Greater Bank’s one-year fixed rate of 2.97 per cent p.a. (comparison rate 4.38 per cent p.a.).
Variable home loan rates keep falling
The great thing about the best rates in the variable market is they are comparison rates. Lenders aren’t loading their loans with fees and charges to produce an artificially low headline interest rate. The market leading variable rates are real genuine low rates.
Reduce Home Loan’s Low Rider Variable has a comparison rate of 2.89 per cent p.a. FreedomLend has variable loan comparison rates starting at 3.04 per cent p.a. while Athena is charging a comparison rate of 3.04 per cent p.a..
Chief executive of InfoChoice, Vadim Taube, said borrowers can organise a big rate cut for themselves by comparing their own mortgage rate with the best rates now in the market.
“Many borrowers are now paying 4.5 per cent p.a. plus on their home loan,” said Mr Taube.
“By refinancing to a loan around 3.5 per cent p.a., a borrower would be give themselves the equivalent of four RBA rate cuts of 0.25 percentage points each.”
Compare home loan products from Australia’s banks, credit unions, building societies and non-bank lenders at InfoChoice.
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