Simon Orbell of Smartmove Mortgage Advisors gives us a wrap up of the current lending environment, change to responsible lending laws and what all this means for the property market.
The lending market continues to change rapidly. A few weeks ago, the Reserve Bank chose to reduce the cash rate even further (from 0.25% to the lowest it has ever been – 0.1%).
Unfortunately, most of the lenders have chosen not to pass this on when it comes to variable rates but have focused on making some significant reductions in their fixed rates.
It is mind boggling to think that rates are as low as they are currently – we are seeing rates the following:
- Owner Occupied 4 Year Fixed – 1.89%
- Owner Occupied Variable – 2.19%
- Investment 4 Year Fixed – 2.25%
- Investment Variable – 2.44%
The above rates are fuelling record levels of loan applications at the moment which is resulting in many of the lenders turnaround times increasing significantly (some lenders are taking over 4 working weeks from the point of submission to pick up a file & assess whether they want to approve it or not). This makes choosing a lender for your application more important than ever if you are looking to purchase a home or investment because many parts of Sydney & NSW are seeing huge demand for property & very low levels of supply. To be able to act fast choosing the right lender from a turnaround perspective is vital. This includes having your documentation prepared and ready to go (pay slips, tax returns, bank statements, ID etc).
We are seeing many “upgraders” choosing to search for properties with extra space to allow for more work from home & a longer commute to the office due to not having to be in the office as much as previously.
The other trend we are seeing a lot of relates to “cash back” offers or “refinance rebates”. Many lenders are offering $1,000’s in incentives to move from one lender to another (along with record low interest rates).
Next year looks like it will be a big one for the mortgage marketplace.
Firstly, the “Best Interests Duty” becomes enforced legislation on January 1. Although most mortgage brokers put their client’s interest before their own, from New Year’s Day this will become law. This means that mortgage brokers will have a statutory obligation to act in the best interests of their client (it is important to note that if a customer approaches a bank directly, the bank won’t have the same obligation to act in the customer’s best interest from a legislative perspective).
Whilst one law comes into effect, another one is potentially going to be removed. Treasurer Frydenberg & the Federal Government have released draft legislation relating to the “Responsible Lending” laws. The proposed changes are intended to improve efficiency in the finance industry, removing unnecessary barriers restricting the flow of credit to consumers & small businesses & improving turnaround times for application processing. The Government plans to make easier for qualified borrowers to access credit whilst at the same time maintaining strong customer protection. We hope that these changes will help address the borderline “forensic” approach to many aspects of the loan application process (particularly in regard to living expenses).
Overall, the impact of the above 2 legislative changes should result in faster, better experiences for borrowers deserving of credit as well as a stronger level of consumer protection that has previously been the case.
With rates expected to be low for many years to come along with easier & faster access to credit, the outlook for the property market looks bright.