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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

Property Gazette - March

Published by Scott Miller on Sunday, March 23, 2014 in

Once again it’s been a busy month at AMS! There is certainly no “let up” in the lending space regardless of the Reserve Bank loan value to ratio rules regarding borrowers with low deposits. Where there is a will there’s a way and we are seeing parents coming to the party with assistance for their first home buyer children with either equity or loans and gifts.

Lending is in fact happening over 80% of purchase price as well.

Never before has there been a more challenging time to be borrowing however, mix in Earthquakes and damaged homes, land damage, loan to value rules from the Reserve Bank and there are still plenty of potential home owners sitting, thinking that it is just a “too complicated” market currently.

That’s where we come in.

Day in and out we are talking with the Banks about lending giving us the “feel’ for what fits and what doesn’t and being right on the pulse is important in a changing  and complex environment.

Many clients do what they consider to be the least stressful and easiest option and just go into their own bank looking for support, but what is easiest and most comfortable isn’t what is necessarily what’s best. Getting an approval up front first time from the right place saves the situation where a decline can taint your next option. A decline shows on your credit history as an enquiry for the next lender to question, be it that you just didn’t fit your own bank’s particular policy or not and makes the next lender question why your own bank may not want your custom.

Approval first time, saves time!

To help support those in the first home buyer space we have also written a guide  called Deposit less than 20% and tired of paying rent?... Our Guide to low deposit lending and options- Part one about the ins and outs of lending in this market, tips and advice about making yourself a good bet for the bank, and what to do when.

Check out our blog here

Have a great month!

                                                  Current Interest Rates as at 18 March 2014

                                                               Variable               5.40% 

                                                                6 Month Fixed     5.35%

                                                               1 Year Fixed        5.60%

                                                               2 Year Fixed        5.90%

                                                               3 Year Fixed        6.20%

                                                               5 Year Fixed        6.85%


Interest Rate Outlook

Last Thursday was the first time in 3 years that the Reserve Bank has lifted the Official Cash Rate which it moved by 0.25%. In isolation this move would have little impact on our property market but given it has been laid over the top of the LVR restrictions put in place in October 2013 it appears that we may finally be seeing a slowing of our property market.

The volume of house sales has slowed through the first quarter of 2014, the pace of price increases has eased and the average days to sell a house slowed.

Many economists are predicting total interest rate increases in 2014 to be around the 1% mark (so another 0.75% through the balance of this year), we are a little cautious about this given the ‘spike in our dollar’ on the back of last week’s small increase which will surely make the government nervous, given the impact on exporters.

Of course we also have an election due in September so rising interest rates and dollar would certainly make government nervous. Although the National party state that they have no influence over the Reserve Bank and monetary policy.

The flip side to the rising interest rates is the 10 year highs in migration with over 22,000 net increase in our population last year which continues to drive house demand. However building of new homes seems to finally be kicking in with over 21,000 consents issued in 2013 which is the highest number since 2007.     

What does all this mean in terms of a borrowing strategy?

Yes variable rates have increased and are likely to again once or twice this year, as such sitting on a variable rate probably doesn’t make much sense unless you are looking to make lump sum principal reductions or repay in full within the next 6 – 12 months.

However, we also caution against fixing in for too long which does carry a premium for certainty. The mid-range fixed rates of 2 - 4 years appear to carry the most value at present, although if you have a sizeable mortgage perhaps a split of longer and mid-term fixed rates would benefit you. It is best to sit down with us & discuss your options.    

What’s Hot

With the recent rise in the official cash rate many consumers who were on a floating interest rate have panicked somewhat, seeing us inundated with requests to fix their rates. The good news is the 18 month to 3 year fixed rates have remained unchanged giving clients a pleasant surprise.   

Deal of the Month

LVR restrictions within the banks are definitely easing, we recently had a client looking to move into property investment with their total LVR sitting at 85%, we were able to get this client approved whereas as little as a month ago this would not have been the case, banks are now getting a handle on managing their allocation of high LVR lending, talk to us - we deliver!

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