The Reserve Bank meets tomorrow to decide what to do with interest rates. The majority of economists are predicting no change. Many are predicting rates will be decreased once more this year. The general consensus seems to be that rates will begin to increase next year at some stage.
Many parts of the economy are still sluggish, housing construction excluded, and unemployment is still too high. The events in Greece are also leading to uncertainty which may cause the Reserve Bank to hold steady.
The government has been successful in making lenders tighten up on investment lending which will slow the market down and negate the need for Reserve Bank action.
So, with rates not looking like increasing any time soon and the likelihood of another rate cut later this year, should you fix?
Fixed rates are still quite low but not as low as some of the variable rates that are available. If you like the idea of the security and are worried about your ability to make the repayments in rates increase then a fixed rate may be for you. Just make sure you talk to your Finance Broker to make sure you are aware of the restrictions of a fixed rate.
We will know what the Reserve Bank does at 2.30 tomorrow. Interesting times ahead!
You may have heard a lot in the press lately about a crack down on investment loans by APRA. That’s the Australian Prudential Regulatory Authority and it’s their job to keep an eye on the banks and make sure they are behaving responsibly, and not about to get into financial difficulty. Not a bad idea if you think about the impact of a bank going out of business.
So what’s all the fuss about? Well, APRA are forcing the banks to limit the growth in investor loans to no more than 10%. This is under the actual growth levels with most banks. In fact in the year to March 2015 investor loans surged by 12.4% according to APRA. The worry is that this may lead to riskier loans and could also be pushing property prices up.
In response the lending industry is taking action. Some lenders are insisting on up to 20% deposit if you want to by an investment property. Previously this was up 10%. Other’s are reducing the discounts and / or increasing interest rates for investor loans.
What this means is that you should speak to your Licenced Finance Broker before you go ahead and sign up for an investment property. Even if you have the 20% deposit, which most investors do, you need to make sure you are getting a competitive interest rate.
There are still plenty options out there for investors but if your bank won’t come to the party it’s time to speak to a Licensed Finance Broker.
13 Apr 2015
The array of mortgages available helps a good credit adviser to tailor a package to suit your needs. Here are just some of the options.
With a fixed-rate loan, you know exactly how much you’ll pay per fortnight or month for the fixed period of the loan (usually one to five years).
Variable rate mortgages
Repayments can change during the life of a variable-rate loan, so you may pay more or less as interest rates rise or fall. If you’re fairly sure that rates are set to fall, this is a good option.
Principal and interest mortgages
In this mortgage, you are paying the amount lent to you plus the interest.
With interest-only, you are paying just the interest on the loan – you are not paying off any of the original principal.
Split home loan (fixed and variable)
You can choose to have part of your loan at a fixed rate and the other part can be at a variable interest rate. If rates do fall, the interest will go down on the variable part of your loan, but you aren’t taking as big a risk should rates rise.
If you have a variable-rate loan and you make extra repayments, then you can withdraw that additional money when you need to (you can’t do this on fixed-rate loans).
A land loan lets you buy a block of land without the pressure to build on it as soon as possible. Land loans are usually variable interest for up to 30 years.
For buying land, building or renovating your home, a 12-month construction loan can be the best way to go. Usually, up to 90 per cent of the property value can be borrowed.
For self-employed people, a home loan can still be arranged using differing supporting documentation that shows your ability to service a loan and might include BAS and bank statements. You self-certify your income, which will need verification. You may be able to borrow up to 80 per cent of the property’s value.
This loan type allows you to convert a portion of your residential property ‘asset’ into cash or an income stream while still allowing you to continue to live in your home.
The best person to help you tailor a loan to your needs is an MFAA credit adviser. Find one here.