So the same old same old……………….
The Reserve Bank this month dropped the Cash Rate 50 basis points to 3.75% but as expected the banks have not been able to pass on the rate cut in full. ANZ are still to advise their intentions but we should know that tomorrow (Friday May 11).
Rates to date have dropped anywhere between 0.32% p.a. to 0.40% p.a.
Although NAB reduced rates the least to date, they still have the lowest Standard Variable Rate of the major banks.
The fixed rate war is heating up again with the 3 year fixed rate the main focus. I am seeing rates from 5.94% p.a., with a number of lenders offering 5.99% p.a.
If you are looking at a fixed rate, you need to be aware that the fixed rate you are offered at application may not necessarily be the rate when the loan is funded. Most lenders will give you the going fixed rate at the time of funding. You do have the option to lock in the fixed rate at the time of application by paying a fee which can range from about $600 upwards.
Should you be paying a fee to lock in a fixed rate now? Maybe, maybe not. Word is that we may see official interest rates drop another 75 basis points by the end of the year. With that in mind, one would expect fixed rates to drop further. Then again with the volitility of the fixed rate market who knows what the banks may do down the track. Raise fixed rates? Could do.
Before handing over money to lock in a rate, you need to consider whether there is a real chance that the fixed rate will stay as is, go up or go down. Generally you will find that your mortgage broker or bank lending officer can’t advise you what to do. It is a decision you need to make as the borrower.
I thought I would share a couple of recent scenarios…….
Non Resident Borrowers
A couple recently purchased a property at auction without having their finance in place beforehand. They approached their Australian bank after the event and were knocked back due to their place of residence and currency in which their income is derived. (Dubai / Dirhams).
All lenders have differing policy when lending to non residents. The main factor is the currency in which they are paid.
In this case I had a lender who approved the clients (no questions asked) with a 20% deposit which was a great result. Time is very much of the essence when dealing with non residents, and they had their documents in Dubai within 5 days of approval and all is on track for a June 1 settlement.
Self Employed Contractor
I saw a couple earlier in the year who are purchasing a property off the plan as an investment. They decided to go with their existing bank who held a mortgage over their owner occupied property and they held a pre approval from that lender.
Last week I received an email from the client saying their finance had fallen over just as settlement is approaching. The issue being the male applicant has taken 6 months leave without pay from his government job to undertake a private consultancy position under an ABN (self employed) structure. Because he is now considered self employed, their lender wanted 2 years financials and tax returns which is the case for most lenders.
In this instance I had a major bank who will consider self employed workers contracted to one entity the same as PAYG workers.
Once again the loan was approved, subject to valuations, no questions asked.
Conclusion
Not all lenders are the same. If you have been knocked back by a lender, don’t dispair. There may be a solution.
Talk to me.
Actually, if your circumstances are outside the square, talk to me before you are knocked back elsewhere.
