Westpac, CBA and NAB lift rates

Regulatory changes on capital requirements has seen the National Australia Bank lift its variable mortgage rate by 17 basis points today,following CBA’s rise yesterday of 15 basis points. It follows Westpac’s raising by 20 basis points last week.

The change applies only to the four major banks (ANZ, CBA, NAB and Westpac) and Macquarie Bank. ANZ and Macquarie have yet to announce whether they will raise their rates.

This allows the smaller banks, building societies and credit unions able to compete against the big four. The winners are the consumers who can benefit by switching to one of the many credit unions and building societies who are actively promoting products and choice for consumers.

Refinance and get $2,000 cash back!

2000 reasons to refinance!

One of our lenders has a cashback offer to owner-occupiers, giving borrowers more reasons to refinance their home loan at a low rate.

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To be eligible for $2000 cashback:

  • The refinanced loan must be a residentially secured owner occupied home loan only
  • Borrowers must apply to refinance their owner occupied home loan to the specific product on offer, until Monday 30 November 2015 (unless withdrawn at the lender’s discretion)
  • The loan must be greater than $150,000

Why wait?  these deals do not remain around for long.  Give Carol a call on 0408 488 755 to discuss for full details.

Changes to Investment Lending – How It Affects You

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Banking regulators (APRA & Council of Financial Regulators), working closely with the RBA and ASIC, have taken non-prescriptive action which applies to our Big 4 and Macquarie Bank by~

  • limiting how much banks can lend to property investors (max. 10% growth for investor loans over the previous year – this could increase to 12%). There are punitive measures for non compliance.
  • making sure customers can afford to pay their home loans long term (minimum serviceability benchmark rate is now 7% – some banks are higher)
  • banks required to increase capital they hold against lending – must be 25% by June 2016 (currently around 16% – hence we have seen share offers to raise capital)

Currently, the measures lenders are taking are discretionary. Lenders have responded by ~

  • limiting investor lending
  • assessing customer applications with greater consideration to current conditions and customers’ long term ability to pay their residential loans
  • introducing interest rate changes to reflect the lending costs of different loan types (note: some banks are also raising the rates on existing investment loans)

What this means for customers ~

  • investment lending may be harder to get
  • refinancing and/or additional lending may not be possible
  • assessment of borrowing capacity is more stringent
  • costs, income, living expense and rental returns are more conservatively assessed
  • higher deposits than previously may be required
  • previously, a home loan was a home loan. Now Interest Only and Principal and Interest Loan terms are viewed differently, as are investor and Owner Occupier purpose loans.
  • more competitive options for home loan customers living in their homes

Some rather drastic action has already been taken by AMP, who have pulled out of all investment lending for the time being – including SMSF loans. NAB have also pulled out of SMSF lending (but will continue to supporting existing customers with loans), discretionary discounts (e.g. given on competitor or volume) are no longer available.

As funding costs rise due to the use of higher equity to fund mortgages, the banks’ return on investments will fall. Banks will no doubt want to pass on the higher costs of equity to its customers (i.e. higher interest rates and fees) or shareholders (lower dividends).

Insofar as property prices are concerned, while there is a perceived mood that pressure on credit may cause prices to fall or stabilise, there is another school of thought that while we have strong continued foreign property investment, the prices may stay buoyant.

While this may all sound negative, the upside is that in slowing down the ratio of investment loans to owner occupied loans, lessens the risk of investors exiting the market en masse in a downturn. Stringent measures imposed by the regulators will also keep our banks strong.

Autumn Warm Up – Rates from 3.89% and $1,000 cash back on refinances

We are very pleased to announce that we will be continuing our successful Cashback campaign to warm up borrowers pockets this Autumn/Winter.  Borrowers who switch their home loan could save thousands with a great rate, enjoy the benefits of our multi-award winning loans and get a $1,000 cashback!

The offer continues to be available to borrowers who switch their home loan of $150,000 or more.

The campaign officially launches on Monday 27 April 2015 and will continue in the market until Tuesday 30 June 2015.

For more information, please call me on 0408 488 755.

Reserve Bank keeps cash rate on hold at 2.25%

At its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent.

In it’s media release, Glen Stevens said that in Australia, the available information suggests that growth is continuing at a below-trend pace, with overall domestic demand growth quite weak as business capital expenditure falls. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.

Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to owner-occupiers, though neither appears to be picking up further at present. Lending to businesses, on the other hand, has been strengthening recently. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.30

Property Auction Clearance Results

Of 1268 auctions held over the Easter weekend, clearance continued to be strong at over 84% properties sold under the hammer in Sydney.  Read more

This is slightly less than the previous week when the Sydney had 1128 homes going under the hammer with an astonishing 87.5% clearance rate – the highest ever recorded in Sydney. It was also extraordinary that it happened to be state election day. Sydney’s property prices have shot up almost 6 per cent over the first three months of the year, the highest quarterly growth in six years, reports Antony Laws of Sydney Domain. Underscoring just how strong the Sydney housing market has been in 2015, home values in the month of March alone increased 3 per cent, according the CoreLogic RP Data’s latest home values index.