You have probably noticed in recent months that financial institutions have started to increase interest rates independently of the Reserve Bank’s decision to keep the cash rate on hold.
Not only are interest rates increasing but financial institutions are now starting to significantly change the lending rules and criteria sometimes on a weekly – and even daily – basis.
- Interest only loans are under scrutiny, for investors AND owner occupiers
- Preferred lending ratios are decreasing – that means larger deposits are required
- Lending criteria is tightening, particularly for investors and off the plan purchases – potentially a headache for those who entered into contracts at a more flexible time
- Bank valuations are starting to come in lower than expected in most states across Australia
If you have been sitting on the fence waiting for lower interest rates or looking to refinance your debt, then your opportunity may already be lost. We are finding loans that were easily financed only a few months ago are now not being approved by many lenders.
What is driving the constant changes?
At a time of record low interest rates you would expect the news for borrowers to be all good!
Instead, lenders and regulators tend to become very nervous about how borrowers will manage their debt when interest rates eventually rise, so they take steps to lessen the impact.
Bank lending rules are not a set and forget. Lenders introduce changes over time largely due to funding pressures. In addition, APRA (Australian Prudential Regulation Authority) has continued to exert pressure on lenders in an effort to slow down lending in a low interest rate environment.
With constantly shifting goalposts there has possibly never been a more important time to regularly review your home loan and take steps to protect yourself from any future mortgage stress.
What are the signs of potential mortgage stress?
- If you are living week to week now, you will not survive a rate increase. CALL US URGENTLY before it is too late.
- If you have multiple investment loans and are highly geared, DO NOT CALL YOUR BANK FOR A REVIEW – you could end up in a worse situation. Call our office.
- If you have an INTEREST ONLY loan coming off the fixed interest period, CALL US URGENTLY.
- IF YOU HAVE ANY FINANCE COMING OFF the fixed interest period in the next 3-6 months. Call us.
- If you have a loan approval in place that is older than 1 month, call us to confirm your approval terms HAVE NOT CHANGED.
- If your credit cards are maxed out and you are struggling to pay out the balance – yes, you too need to call us.
How can we help?
The reasons that more than 50% of Australian home owners NOW use mortgage brokers are:
- We do all the research (that takes time and patience) to understand different lending products and can recommend several options for you across many different lenders. Your bank can not do that.
- We are a professional service provider and we educate you throughout your finance journey with us and beyond.
- When rapid changes are happening in the world of finance, we are best equipped across the range of lending products to help you identify how to get through these changes and come out singing!
These are interesting times and although we are currently in a low interest rate environment, that doesn’t stop the landscape from changing.
You are best to catch up with us at least every 18 months – preferably every 12 months.
Even just a 10 minute phone call to the office may help relieve the stress of not knowing whether you should be taking action.
It is much easier for us to help you BEFORE mortgage stress sets in. Please do not leave it until it’s too late for us to review your finance.
Call the office TODAY because we are going to be busy over the coming months.
If you have friends or family, please forward this article on to them as well. We want to help everyone else you know who has a mortgage to be informed.