James Grima

Mortgage broker James Grima says it still possible for borrowers to secure mortgage rates that start with a ‘3’. Mr Grima said that sub 4% interest rates are possible if borrowers are prepared to accept principal and interest loan repayments on their home loans.

Overtime, interest rates on home loans become uncompetitive if they are not continually reviewed and renegotiated with the lender. Borrowers should at least annually ask their bank or broker to review their interest rates to ensure they remain competitive.

“It is surprising how many clients manage their home loans like electricity bills and don’t review rates in order to save money,” said James Grima, Managing Director – Finance, Omniwealth.

Reviewing rates can save borrowers thousands of dollars each year.

“An ideal client for a lender is one that does not continually review their rates and are unknowingly paying more interest each year than is necessary.

“We review rates on behalf of clients each year. If a client’s rate is not considered to be competitive at the time of the review, we will contact the lender and renegotiate the rate. Lenders in most cases will renegotiate the rate to meet the market,” said Mr Grima.

Your rights in changing banks

Unless the mortgage agreement specifically prevents a borrower from changing banks (which none of them do) the main impediment to doing so will be commercial rather than legal.

The main factor that will need to be considered is the cost of moving banks by way of exit or other fees for the early payout of a loan. Currently, many banks will, however, cover this cost if you move over to them.

The next consideration is the fixed rate payout (i.e. the sum that will need to be paid to exit that loan and move to another bank). Once this is determined, and the borrower has agreed to move, the transfer is formalised by way of a Discharge of Mortgage.

By James Grima, Managing Director – Finance

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James Grima

James Grima at Omniwealth Mortgage is seeing better prospects for Sydney home buyers as the market cools.

The slowdown of the residential property market, particularly in Sydney, has been good news for buyers as they no longer have to aggressively compete with other buyers to secure a property.

“In respect to interest rates, lenders for the first time in many months are starting to compete more aggressively for ‘Interest only’ and ‘Investment’ loans. We see no major changes to rates in the foreseeable future, particularly for clients seeking loans with principal and interest repayments secured by owner occupied property.

“This is a very competitive part of the lending market with the non- bank lenders providing the lowest rates. The current interest rate environment is a good opportunity to review existing loans and possibly refinance to another lender offering lower interest rate.

“We are now seeing clear evidence that the property market has softened with a number of our clients successfully purchasing property over recent months.

“Many had loan pre-approvals in place for more than six months and were continually missing out on properties they were keen to purchase. The feedback from clients that have recently purchased a property is that there were less buyers attending property inspections and the price they purchased the property for was within their expectations.
“The majority of our clients that have attended an auction over the past two months have been successful, which is in contrast to the twelve months prior where the  majority were unsuccessful due to the sale price being well above the reserve price and expectations,” said James Grima, Managing Partner – Finance, Omniwealth.

Lending conditions favourable for P&I loans

The improved conditions for purchases have been influenced by the tightening of lending policies over the past twelve months, along with the restrictions that APRA have put on lenders in respect to ‘Interest only’ and investment loans.

Whilst it is certainly more difficult to obtain a loan today than 12 months ago, lending conditions are still favourable, particularly for borrowers that are purchasing a home with ‘Principal and Interest’ repayments.

The focus for lenders this year has been on interest-only and investment loans in response to regulatory caps on growth set by APRA.

Earlier this year there were across the board interest rate increases for clients with interest-only repayments and investment loans, however, the rates on these loans are softening due to many lenders now meeting the regulatory caps.

Lenders are offering very attractive rates (fixed and variable) for principal and interest loans secured by owner occupied property.  Lenders are also willing to negotiate better rates for investment loans that have principal and interest repayments.

There is still a significant enough difference between the interest rate on interest-only and principal and interest loans to push borrowers towards principal and interest repayments.

The interest rate saving can be up to 70 basis points with some lenders.

By James Grima, Managing Partner 

The post Investor world is changing: P&I loans may be only way into property market appeared first on AdviserVoice.

James Grima

The focus for lenders over the past month has once again been on interest-only and investment loans in response to regulatory caps on growth. There were across the board interest rate increases of 30-40 basis points for existing and new clients with interest-only repayments.

There is now a significant enough difference between the interest rate on interest-only and principal and interest loans to push borrowers towards principal and interest repayments. The interest rate saving can be up to 70 basis points with some lenders.

In respect to investment lending, several non-major banks reduced their lending value ratio on new investment lending to 50% to curb investment growth.
What has changed for investors seeking interest only loans?

The above mentioned changes are making it more difficult for borrowers to refinance their loans in order to obtain a better interest rate, particularly if they are refinancing an investment loan or seeking interest-only repayments. There is not enough financial incentive for these clients to change lenders, unless they opt for principal and interest repayments.

Lenders have continued to tighten lending standards over the past month with a particular focus on interest only loans. The tightening is a result of recent changes made by APRA that requires lenders to limit interest only loans to 30% of new mortgage lending.

The actions taken by lenders to ensure they remain within the APRA benchmark include rate increases for interest only loans and no longer offering interest only repayments on loans with a lending value ratio above 80% or secured against owner occupied properties. St George unlike most lenders will not allow any discounting on interest only loans, regardless of the loan amount and quality of the client.

Stay positive about borrowing if it is the right investment property

On the positive side, lenders are offering very attractive rates (fixed and variable) for principal and interest loans secured by owner occupied property. Lenders are also willing to negotiate better rates for investment loans that have principal and interest repayments.

The interest rate difference between interest only and principal and interest only loans is approximately 30 basis points and for this reason an increasing number of clients are choosing to change their repayments to principal and interest.

By James Grima, Managing Partner – Mortgage and Finance

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