Homeowners urged to move as variable home loan competition heats up

Homeowners urged to move as variable home loan competition heats up

Competition in the variable home loan space is heating up, as NAB today trims its base variable rate by 0.10% - but only for new owner-occupiers, according to the financial comparison website RateCity.

NAB's lowest variable rate is now 2.19%, aligning with big four bank competitors, Westpac, and ANZ. However, NAB offers this rate for customers with 20% deposits, unlike Westpac and ANZ, which require 30% or bigger deposits.

Interestingly, while dropping its variable rate, NAB increased its fixed rates for the sixth time in six months, noted RateCity. The bank raised its fixed rates by up to 0.50% for owner-occupiers and investors. Following these changes, NAB has only one fixed rate under 3%, at 2.74% for one year.

Financial specialist Craig Betalli, a Senior Finance Specialist at Our Broker, said "Until the latest cycle, the lenders used historically low fixed rates as the competitive battleground. Now, as the fixed rates have increased, they have decided to offer lower variable rates as a means of attracting greater market share."

According to Craig, it's a classic case of robbing Peter to pay Paul. "It seems that the lenders are using some of the profits from their fixed rate hikes to offer these discounted variable rates," he said.

RateCity.com.au research director, Sally Tindall, agreed, "While fixed rates are rising rapidly, there is still plenty of competition in the variable home loan market."

She continued, "NAB has bowed to the pressure and cut its basic variable rate to match its big bank competitors Westpac and ANZ," she said.

"Despite no change from the RBA, we've seen the average big four bank's basic variable rate drop by 0.35% in the last year, but only for new customers.

"For anyone on a variable rate, now is the time to haggle with your lender before the predicted RBA rate hikes begin," she said.

Craig Betalli added, "While the Reserve Bank hasn't touched rates for 17 months, homeowners might be able to give themselves a rate cut by shifting lenders to grab one of the lower variable rates with the assistance of a finance specialist such as Our Broker.

TO FIND A SUITABLE HOME LOAN WITH A VERY COMPETITIVE RATE AND FEATURES TAILORED TO YOUR NEEDS, CONTACT OUR BROKER ON 1800 913 677.

How do I prepare for higher interest rates?

How do I prepare for higher interest rates?

There is no doubt it is time for homeowners to consider the prospect of interest rate hikes, particularly after the Reserve Bank governor Philip Lowe failed to rule out an interest rate rise before 2024.

If you have a variable rate mortgage, the advice from Craig Betalli, Senior Broker with Our Broker, is that a "split rate loan" could be the shrewdest way to future-proof your mortgage against possible rate increases. A split rate loan lets you divide your mortgage between fixed and variable rate components. This strategy allows you to enjoy the best of both worlds - the certainty of a fixed rate and the features of a variable rate loan, such as a 100% mortgage offset, which enables you to pay down the loan faster.

However, whether you choose a split rate or a fixed-rate loan, you must decide how long you'll lock the rate in for whether it's 3, 4 or 5 years. As part of this decision-making, you must consider a myriad of factors such as what your borrowings are, what your cash flow looks like, whether your career or business prospects are likely to change over the next five years, and your age and family situation. Fortunately, a finance specialist such as Our Broker can help you work through these variables when deciding on the right mortgage strategy.

When selecting fixed rates, if you have the choice between a five-year rate, which is cheaper than a 3-year rate, then locking in for the half-decade is a no-brainer. However, when the 3-year rate is cheaper than the 5-year fixed-rate, you must work out the extra cost for the first 36 months and how you will make it up in the last two years of the five-year term. Obviously, to make the five-year fix a winning strategy will mean banking on the RBA increasing official rates. So, there are risks with this strategy that a mortgage broker can help you navigate.

At the same time, whether you choose a split rate or not, Craig urges homeowners to make hay while the sun continues to shine on historic low-interest rates. Every extra dollar you pay off your home loan now is a dollar less you'll need to pay when rates increase. Moreover, if you have a fixed rate and breach the extra repayments cap, consider parking any additional payments in a saving account. When you come off the fixed-rate, you can use these savings to make extra payments off the mortgage.

To find more about the best way to retire your mortgage debts, contact Our Broker today on 1800 913 677.

Is it time to fix my home loan interest rate?

Is it time to fix my home loan interest rate?

Whether you fix the interest rate on your home loan now or not depends on your goals, circumstances, and risk profile.

Probably the best time to get a fixed rate was about 5-6 months ago as fixed rates are now around 2.39% for two years up from about 1.8%. Alternatively, it's still possible to find variable rates as low as 1.94%.

The impact of the Reserve Bank

Whether you fix your home loan or not is also an extremely timely question, particularly with some commentators predicting as many as four rapid-fire official cash rate increases when the Reserve Bank decides to move. Assuming rates go up 0.25% each time, a principal and interest loan with a rate of 1.99% could jump to at least 2.99%. This increase would add $400 a week in mortgage repayments on a $600,000 balance with a 30-year term.

However, the Central Bank remains cautious about rate increases as inflationary pressures aren't necessarily demand-driven but rather are caused by a lack of supply. For example, the hospitality industry is running on empty because there is a shortage of workers for hotels, restaurants, and cafes. Of course, the reopening of international borders might address headcount shortages for the hospitality and services sectors, while more tourists will mean more demand for caf latte, hotel rooms and smashed avo. However, it's a case of 'wait and see' for the RBA for now. That said if you can find a respectable fixed rate now, then grabbing it would be a smart move.

Nevertheless, choosing between a fixed rate, variable rate or a mix of variable and fixed, known as a 'split loan', is always case by case. For example, if someone is borrowing 95% of the property's value, are debt averse or are pushing their borrowing capacity to limit, then a fixed rate might be the best option - or at least a split rate with much of the loan fixed.

Then again, suppose the borrower plans to make significant repayments and has excellent employment prospects. In this case, an Our Broker specialist might tailor a split loan towards a more substantial portion of the loan being a variable rate - say 70% variable with the rest of the mortgage fixed.

Whether to fix your mortgage or not is always a 'horses for courses' decision, which a financial specialist from Our Broker is available to walk you through. Call Our Broker today to learn more about the most suitable loan structure for your circumstances on 1800 913 677.

What is a packaged home loan?

What is a packaged home loan?

Having a mortgage is an essential step on the path to homeownership. However, most banking institutions will also allow you to address some of your other financial needs as part of a packaged home loan.

A packaged home loan combines your mortgage with other banking services. A packaged home loan usually includes a credit card, mortgage offset account and savings or everyday banking account. Some packaged mortgages even offer additional services, such as financial planning and share trading if you're looking for investment diversification.

Not all packaged home loans are the same, but there are similarities, such as interest rate discounts. This discount is often tiered depending on the amount you borrow. In other words, if you borrow more, you'll earn a more competitive interest rate.

We mentioned earlier that 100% offset accounts are a common feature of many packaged home loans. An offset is a transaction account linked to your home loan. Any funds you save in this account will offset your mortgage principal and thus reduce the amount of interest you pay.

Whether it's an offset account or some financial advice, the primary benefit of a packaged loan is that it combines a raft of financial products in one place. You will pay an annual fee for this convenience, often around $400.

But then again, the fee often replaces multiple other fees the lender charges for each product individually. So, be sure to weigh up the benefits and convenience of a packaged home loan and whether you'll use all the products before assessing whether this is suitable for your financial situation.

As part of your decision-making, be sure to check with a finance specialist from Our Broker about the range of packaged home loans available to you. This specialist will ensure you find a packaged home loan with the most suitable products, interest rates and fees that meet your personal circumstances.

To find out more about home loan packages, contact Our Broker today on 1800 913 677.

With interest rates set to rise, is it more important than ever for homebuyers to get a home loan pre-approved?

With interest rates set to rise, is it more important than ever for homebuyers to get a home loan pre-approved?

A home loan pre-approval is an enquiry with a lender about the likelihood of you being lent a sum of money to buy a property. Moreover a finance specialist such as Our Broker can help you find the right lender so you get the best outcome for your property purchase.

Searching for a home to buy without preapproval makes it very difficult for you to know your borrowing capacity. You could be wasting your time looking at properties which are completely out of reach budget wise, or even looking at properties lower than your repayment potential. You could be missing out on your ideal property.

Getting a pre-approval in place should the first step in your journey to buy a home. It will put you on the right track to knowing what you can afford and hence, the suburbs you should be looking at. An Our Broker mortgage professional will confirm your monthly repayments as the pre-approval process also involves looking at your daily living expenses. This step ensures your home loan will be affordable, while taking into account life changes, such as starting a family. And it's all completed before you lodge a pre-approval application.

Pre-approval can take a couple of weeks to complete, depending on the banks' workload. To help make the process go smoothly, it is important to have documentation which confirms your identity, income, savings and spending behavior, as well as your previous loan history. Don't assume that because you have either a high income, or a lot of equity, that the bank will overlook cluttered savings or credit accounts.

A finance specialist from Our Broker will look at details of your savings and earnings, along with a proposed purchase price figure, and even the property you have in mind. They then lodge a pre-approval for the proposed purchase. Once approved your home buying journey can begin.

When the time comes that you have found the right property for you, a broker will instruct the bank to order a valuation to confirm the purchase price and the bank will then issue your approval as unconditional. You then have your new home or investment property secured.

While the cash rate is predicted to increase, the RBA have indicated there will be measured increases and it might not affect your borrowing position. However, with interest rates already being increased by the banks on a daily basis, it's important to have an up-to-date fully assessed pre-approval in place.

To enquire about getting a pre-approved home loan, contact Our Broker today on 1800 913 677.