The Reserve Bank has once again this month decided to keep rates on hold at the record low rate of 1.5%, but Australian home buyers are still facing uncertainty with some banks choosing to increase fixed, interest-only and investment loan rates in recent months. So what does this mean for home buyers and how can you still benefit from the low interest environment?
Rob Emmett, CEO of Collins Home Loans is encouraging borrowers to be proactive and look around for better deals. "Competition in the mortgage sector remains high with the diversity of loan product choice never stronger - which means that shopping around is more important than ever before" he says.
Earlier this year the Commonwealth Bank raised rates on fixed term owner occupied and investment loans by up to 65 basis points. Westpac recently raised fixed interest rates on new and existing interest-only home loans. And now the ANZ has become the latest of the big four banks to lift its variable interest rate.
Tracking the commentary by the CEOs of these banks and you quickly see that they cite changing market conditions and regulatory changes, which now requires the major banks to retain more capital as a buffer against any future risk.
Australian banks borrowing costs have also risen due to a reliance on the international capital market. Some commentators are referring to this as the ‘Trump effect’, but the reality is that the Australian banking sector has been shifting in this direction since December 2014, when the banking regulator APRA changed the criteria for investment lending in an attempt to cool property prices in Sydney and Melbourne. Therefore Trump’s Presidency has probably accelerated this pattern rather than initiate it.
Rob Emmett said that “the Banks have been operating independently of the RBA for some time now and I cannot see anything changing in the coming months as banks continue to respond to external pressures both regulatory and from international forces”.
Opportunity is still knocking
Rob Emmett still thinks there are opportunities for good home deals but he warns that low interest rates won't last forever. “As a general rule of thumb fixed rates are one of the best indicators of market expectations of future rates and with these on the rise, we can only anticipate that there will be continued upwards pressure on rates in the coming months”, he says.
“The exciting thing about the Australian mortgage market is that the origin and cost of funding differs between lenders and there is lots of competition out there”, he says. “Shop around”, is the key advice and “don't go straight to your bank, rather use a mortgage broker to identify the best options to suit your particular needs" he says.
In Victoria for example, up to 600,000 first-home buyers are set to save with proposed stamp duty changes across Victoria. And as part of the government’s drive to increase house affordability, there will also be a new tax levied at 1% on vacant residential property to target empty properties in Melbourne's inner and middle suburbs. These measures, along with a highly competitive non-bank mortgage marketplace, mean tere are still plenty of opportunities available to home buyers.
What direction to take?
As these changes vary from lender to lender, there is uncertainty in the marketplace as to which way to turn. "Reassessing your loan can be a great place to start", Rob Emmett says. "It may be worth considering refinancing in order to lock in part or all of your mortgage at the current interest rate. There are a number of fixed and variable rate deals below the four per cent mark at the moment", he says.
As a mortgage broker, Collins Home Loans is in touch with the latest changes occurring in the industry and can seek out the best options to suit your particular needs. If you would like to contact one of our mortgage brokers to discuss your current situation or make a loan enquiry, please click here.
