At Mortgage Advice, we have been asked a few times since the announcement of the budget what its impact will be on mortgages. So I thought I would give a quick mention to a few of the things we are seeing in the industry. Now some of these things might not have a direct link, but…….
The 3, 4 and 5 years fixed rates seem to be reducing – The banks pay their economists a lot of money not to get this wrong. So I would argue that the budget has caused the banks to lower their expectations of the economy. The upside is it indicates that the low rates will continue. The downside is employment security may be a problem, just ask a public service employee.
LVR restrictions – some mining towns are having the amount of money that can be borrowed against the property reduced. one bank has reduced from 95% to 90% for owner occupied and 80% for investment! If the mortgage insurers are pushing this change then expect these areas to have some instability in the property market.
High LVR loans are also proving harder to get over the line with either reduction in LVR eg from 95% + full LMI to 95% inclusive of LMI. with a few banks still doing 95% + LMI to a maximum of 97%. I believe part of this reduction is the from pressure being applied by APRA. As these loans are considered risky and may expose borrowers to negative equity is housing prices fall.
So whats the bottom line? low interest rates and a nervous population is creating a good time to invest in property if you have equity and a solid income source. I have clients buying property in the outer areas of Brisbane, buying houses that rent for $300pw for $250k. This represents a great yield and means it is also cheaper to buy then rent currently in these areas.
If your employment is looking a little unstable I would suggest reviewing your current mortgages to get the best deal while you can, and start putting in a little extra just in case the worst happens.
Contact Mortgage Advice if you would like a free mortgage review. and remember we give the banks commissions back to you to help you pay down your debt faster! in most instances making us cheaper then going direct to the bank over a 1-3yr+ term.
Have a great week.
Luke
LVR= Loan to value ratio
LMI= Lenders Mortgage Insurance
APRA= Australian Prudential Regulation Authority
