Why FY2021 will be the Year of the New Home Loan
For the last few years, it’s been tough for both prospective mortgage holders looking to get their first home loan as well as seasoned mortgage holders trying to refinance or add to their property portfolio. Bank policies, lending restrictions as well as less fervent competition among lenders has seen a less than enthusiastic lending marketplace.
But welcome to FY2021, where applying for a home loan application is more appealing now than it has been in recent years with market conditions much more favourable as well as banks vying for your business and rewarding you for it. Here is a breakdown of why this is.
Historically Low Interest Rates
Since the start of this calendar year we are now consistently seeing rates well below 3%. This trend is not only apparent with the more obscure and restrictive lenders, but there are rates teetering in the low 2%’s with many conventional lenders. Apart from the incredible savings, low rates can also potentially mean increased borrowing capacity in some circumstances providing options that were previously unavailable.
Lower Servicing Rates
A servicing rate is a rate at which a bank assesses an applicant’s capacity to repay a loan. 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.
The Best Interest Duty
One of the outcomes from 2019’s Royal Commission into the Banking Sector was the introduction of the Best Interest Duty to be implemented at the beginning of next year. This mandates that mortgage brokers “determine and assess the best interests of the consumer and present recommendations in line with those interests”. What is interesting about this legislation is that it extends only to brokers and not to banks, meaning that banks are under no obligation to demonstrate that they are acting in the best interest of the client. This is a clear win for the consumer choosing to engage the services of a broker because you are assured that they are acting solely for your benefit.
Rebates and Incentives
Many lenders are offering unprecedented low rates and competition is fierce. To “sweeten the deal” when trying to win your business several banks have rebates on offer starting at $2,000 per settlement with each lender offering a rebate having their unique set of requirements to qualify. Since the start of this calendar year across several different institutions we have helped facilitate the payment of tens of thousands of dollars in rebates for our clients.
Both the State and Federal Governments announced new grants earlier in the year to help bolster the building industry and stimulate the economy. The Federal Government’s $25,000 Home Builder along with the State Government’s $20,000 Building Bonus are initiatives that may be a great way to help anyone who has been considering building a home. These are also complemented by the existing First Home Buyer grant of $10,000 for new purchases and construction along with the First Home Deposit Scheme. These are unlikely to be around indefinitely and we encourage those considering utilising them to get the ball rolling. For more information, click on the below link
We are excited for what FY2021 is going to bring our clients, whether they be new or existing. Your first port of call is to contact the Blackburne Mortgage Broking team to ensure you make this Financial Year the best one yet.