Hi Everyone
Hope you’ve all doing well - and that you’ve had a good start to 2021.
As was the case for most of the world - for us involved in finance - 2020 was a year like no other. We experienced record volumes of business, record low interest rates, numerous policy changes, significant extra steps introduced due to Covid 19, and the commencement of new Best Interest Duty regulations.
If you are likely to be seeking finance in 2021 - and need my assistance - I’d be more than happy to help. I have detailed some points below, that are relevant currently, and you should be aware of before entering into a purchase contract, or potentially looking to refinance.
There are of course many other points to be noted, but I’ve picked five areas I consider to be particularly relevant at the moment
Of course it’s a changing world, and we are seeing constant movement and adjustments, in timeframes, policies and requirements. I’d be happy to update you at any stage regarding the current state of play.
Mark
Turnaround Times
Certainly one thing to be aware of, currently, is how long it is taking the majority of banks to assess home loan applications. The major banks, in particular, are struggling with current levels of business, as well as staffing issues associated with Covid-19. It’s not unusual to have to wait at least 2 – 3 weeks for an initial response, potentially longer. Keystart, the WA government funded lender, popular amongst first-time buyers, are currently taking more than 5 weeks to pick up applications. It’s worth noting we do have options, with smaller second-tier lenders, where normal timeframes still apply. I.e. they will pick up the application within a couple of days. It’s just something to bear in mind - particularly if you are considering making an offer on a property, and requesting a certain period of time to obtain the finance approval. We are generally recommending 28 – 35 days as a minimum required time.
Interest Rates
As you are probably aware, interest rates are still at a historically low level. To give you an indication, variable home loan rates start around the 2.3% mark, with fixed home loan rates available from around 1.9%. The rates depend upon a couple of different factors - primarily the loan to value ratio. For example if you are borrowing up to 95%, and putting in a 5% deposit, interest rates will be less competitive, compared to say a 60% loan with a 40% deposit. Generally also - the more you borrow - the lower the interest rate, although this isn’t the case with all lenders. Further interest rate cuts are predicted - but whether the banks will pass these on is anyone’s guess.
The Application Process - Prepare for lots of questions!
Whilst we try to guide you through the application as best we can, and make the process as easy as possible, we are finding the level of scrutiny from the banks, is increasing. This applies to the information and documents we are required to collect from you initially, as well as the questions that follow, once the application has been picked up. Essentially - they are going through everything with a fine tooth comb. One area in particular, that seems to be generating particular attention, are your monthly living expenses. We are required to disclose these to the bank upfront - but in many cases the lenders are responding with further queries, and wanting clarification. It’s making the process a little onerous, however it appears to be at least for the time being, the new normal. Perhaps things may become a little easier moving forward, we’ll just have to wait and see.
Best Interest Duty
New legislation was introduced this year, designed to ensure mortgage brokers act in the best interest of their clients. If we appear to be asking a few additional questions upfront - and you notice a change in the amount of paperwork - it is likely to be as a result of this. Ultimately though - it benefits you - as we are required to document how a chosen loan product specifically suits your requirements and objectives, and how we don’t benefit by making that particular choice.
Grants
There are still grants available for new properties and construction, most notably the $10,000 first homeowner grant, and the extended $15,000 Federal grant. To be eligible for the $15,000 grant, you need to sign a building contract by the end of March. Note that the $20,000 state grant no longer exists. There are also government backed guarantees and potential LMI [lenders mortgage insurance] waivers up to 95% - if you fit certain criteria. I’d be happy to discuss any of these with you in more detail, to confirm if you qualify.