Finance Update | April
Just touching base on what sort of happening from a financial perspective the last couple weeks. Obviously, there has been a lot happening around the world, but could you give us an update of what’s going on in the finance sector at the moment?
Sure! I’ve been super busy with getting clients better interest rates. We’ve got Interest rates as low as 2.09% now so that 2.09 is incredible levels. So just been reaching out to a lot of the existing clients and then the new clients coming in. It’s a great time to be to be getting a home loan. On the bank side of things and policy, there’s been a couple of minor changes some of the banks have introduced some covid related questions, you know, if your particular job or industry’s affected by covid how has that impacted your income or expected to impact your income. So we’ve had to deal with that a little bit but you know, as long as it’s logical and framed in the right manner and presented to the banks, which your broker should do.
We’re hearing that banks are doing their part, but with people putting their mortgage repayments on hold, how does that effect their loan? Surely they’re going to have to pay that interests in the long term. Is it that they pay interest on the interest or they just pay interest in one sum or is it spread out over the home loan – how does that actually work?
It does depend and it does differ with each lender, but generally the interest that accrues (let’s just say it’s for six months) the interest that would have normally paid gets added on to the loan balance at the end of that six month period. Some banks change the repayments at the end of that six months for the remaining loan term so your monthly repayment will go up to pay that interest off. Some banks will add, you know, six months to your home loans. So if you had 25 years left on your home loan, you’ll have 25 years and six months. It really does differ between each bank how they are dealing with it. My advice would be to speak to your broker. I’ve had a lot of phone conversations with my clients where, if we can hold off doing that for a little period of time, I would advise that but it’s a case-by-case thing.
Are the banks asking for more information these days? Is it still standardised ie. if you’ve got your job, you’ve got your job or are they actually asking for anything more?
Yes they are if they think you’re in a high-risk industry or a high-risk role. So, if you’re in tourism, hospitality, you know those sorts of roles where covid has impacted those industries they are asking for employment letters. They are asking for what you’re going to do when you go back to work. If you’re self-employed there’s a lot more questions being asked on how covid has it impacted your business and when do you expect it to pick up, things like that.
So you talked about interest rates before, some people have got fixing interest rates. If you are fixed and this is all happening, is there any way you’re getting out of it? Is it still just fixed?
Generally, no you’re not getting out of it because the break cost is applicable to your current fixed rate. I haven’t heard of too many people being able to do it and then re-fix. I suppose you can always ask the question. I had a client the other day with Bankwest where he actually broke his fixed loan and paid the break cost because it made sense for him over a 12-month time frame to go onto the lower rate. We ran all the numbers and he was still in front by doing so he was happy but that’s not applicable for every case. Again, I can’t stress enough, I think every time we talk but pick up the phone and speak your broker. If you don’t have one engagement broker, give me a call and you know, just go through all the scenarios before you make a decision.
I have noticed that, as much as the banks are there to make money, they actually seem to be becoming more personable. I got a call from the bank manager of Westpac yesterday just calling to see how I was doing, so that was interesting and I guess good service. But it feels like they are definitely reaching out. I guess there’s a lot of good rates and good deals going around?
Yes their touch points are more important than ever and I agree with you wholeheartedly there. You know, if they don’t support people in these sort of times – it’s a chance for them to win back a bit of loyalty. The feedback I’ve had from the big banks or feedback from my clients about the banks has been pretty positive overall in the last couple of weeks.
I guess people that are in the market at the moment, people in industries that are thriving right now and where people’s jobs are very much secure in that they are making a lot of money or haven’t been affected. These people that are looking to buy, is there anything they should be doing? Who’s showing the best deals?
So not to be bank specific, but they should be getting pre-approved up front. Some banks are taking a lot longer than others to deal with the changes they’ve had to deal with through covid. For some banks, their assessors were already working at home prior to this so their systems just haven’t changed at all. Whereas other banks that had a centralized processing unit to then shift all those people to work from home has caused massive delays. So their assessment time frames have blown out to two, three weeks or even four weeks. So you need to know that up front before you go and put an offer in on a property because you need to allow for it on your finance clause. Whereas there’s other banks like Bank West that still have just three business days, their process hasn’t changed at all they’re still churning them out. So you do need to know that up front and that’s why its important to be pre-approved up front. It just takes away all the hassle of going through finance and the stress of the finance while you’re under offer.
It’s a bit of an interesting time. I don’t know if you read that column on that the chief economist from REI the other day? He’s sort of predicting what’s going to happen in Australia and in the Perth market. Depending on when China gets back to business, the iron ores are going skyrocket and gold will continue to keep pushing up and up. Australia is about to become the largest exporter in gold and obviously Western Australia is the big main factory house over here. So it’s going to be interesting over the next six or twelve months. A lot of people are saying it’s going to drop or something, but he’s actually saying that for Perth, usually when they zig over there we zag over here. When Melbourne is going up we plummet, but they’re going to start thinking – we’re not overpriced here and they seem to be very much overpriced over there. So it’s going to be interesting to see what actually unfolds.
Yeah, I agree with you.
So finishing up – is there sort of anything that we need to know?
Just again it’s not always about interest rates but while these interest rates are floating around why wouldn’t you look at your home loan? You may have extra time and people are sitting at home more. So just get online and have a look – if it doesn’t look like low twos or mid twos or certainly under three, you should be speaking to someone about it. Just give me a call.
Nick Constantine at Capita Finance.
M: 0418 919 203