14 Dec 2020

This year has seen the world turn upside down in many ways, mostly in a negative capacity. Interestingly, the world of finance and mortgages has come out the other end relatively unscathed. Here’s why 2020 has been great for taking out a mortgage and why 2021 could be even better.

Low Interest Rates

Both Fixed and Variable rates are at an all-time historic low which translates into great savings for both new home loan applicants and existing mortgage holders. The RBA cash rate is sitting at an all-time low with many economists still not ruling out further cuts. No matter what the Reserve Bank ultimately does, we are currently seeing some fixed rates less than 2% for several year terms so this means you could realistically secure a low rate that will last for a few years.

Lender Incentives

Lenders are unapologetically clamoring to win new business and we have seen a consistent pattern of significant rebates offered across our lending panel by many institutions who understand that customers love to receive a little bonus for their trouble. Many rebates currently available in the market could still be available 2021. That being said, they could be pulled without warning, so we recommend getting on the front foot before they expire.

Decreased Assessment Rates

The Assessment rate is the rate which a lender assesses an applicant’s capacity to repay. Prior to May last year APRA (the Australian Prudential Regulation Authority) had imposed a floor on the rate of seven percent, meaning banks could not assess a borrower’s capacity to repay below that figure. This restriction has now changed to 2.5% above the actual rate. This means, given the low rates on offer, banks are now free to assess your servicing capacity at 2.5% above the rate of the product you are applying for. As many rates are sitting below 3% there is the real potential for increased borrowing capacity that was perhaps not there before.

High Rental Rates

The rental property market has seen some marked change with vacancy rates currently notably low. This in turn results in higher rental rates, making buying a property potentially cheaper than renting more so than ever. On the flip side, investors are also enjoying a higher rate of return with increased rents, couple this with low interest rates and it has eased the pressure for some.

Increased Property Values

The property market, certainly locally, became somewhat buoyant in the latter part of the year which has seen values in certain locations spike as a result. This has assisted some mortgage holders in finally having the ability to revisit their refinance options if lack of equity in the past has held them back. So, if you have been one of the many mortgage prisoners unable to move to a better rate due to a property valuation, make ordering a new valuation through your mortgage broker one of the top priorities of 2021 and lets see if a low rate may be on your horizon.

The year 2020 may go down in history as one of the more challenging in recent times, but when it comes to your home loan options and applying for a new mortgage, things are far from dire. If you have not had a chat with one of our brokers lately about what may be available whether it be with your existing facility or a new one, then you now what your New Years’ Resolution needs to me. There is no need to be paying too much on your loan in 2021, your Blackburne Mortgage Broking team will make sure of that.

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