You may have read recently about various economic facts and figures as they have been made public by our economic sleuths. For instance, you may have heard about the levelling out (in some cases, a fall) in various housing markets around the country. You may have heard about the RBA’s hand wringing about the lack of wages growth or you may have heard about the positive employment numbers or that first home buyers have re-entered the market.
Out of all that news the one that is glaring to me is the rapid decline in investors in residential housing according to the Australian Bureau of Statistics. The reason? Well that’s the bit you rarely read about.
You see about 14 months ago banks, under instructions from their regulator, started to differentiate pricing between investor loans and owner-occupied loans. They also raised prices on interest only borrowers.
So much so that – at the time – the differential in interest rates between an owner-occupied loan and an investment loan (which had been zero) drifted out by as much as 1.5%. So, if you were an investor paying interest-only your loan repayments increased by as much as 39%. That is significant.
Most investors did nothing. They copped these rate rises it on the chin. Some of our clients called us and we found rates that were slightly better but nothing too dramatic.
Now though, we’ve seen those rates – for investor loans – come right back in price. That’s right, some lenders have been cutting rates without shouting it from the rooftops. Rate cuts by stealth if you will.
The reason for the stealth is simple. They don’t want existing customers to come back and ask for a rate cut. They just want to quietly attract new ones.
Investors weren’t the only ones copping an out of cycle rate rises.
If you have an equity style of loan (it’s called different things at different banks), then you also saw a significant increase in the price of your home loan.
If you have an interest-only loan, same thing (even if you occupy your property).
Now, I’m not going to run a commentary on the rights and wrongs of any of the above rate rises. That’s just a waste of energy and quite frankly, doesn’t help.
What I can tell you is that you should talk to your lender now to see if they can reduce your rate in line with what they’re now offering new clients. That should always be your first step. It’s the cheapest option.
If they refuse – and I would be surprised if they did – then come and have a chat to us. We’ll map out your options and send you back to your lender to have another go. Once they see that you’re serious they – if permitted by the regulator – will usually come to the party.
If they continue to say no, it’s time to move. The cost of moving is a lot cheaper than it used to be but you should still factor in between $600-$1,200 depending on your current and future lenders. Sometimes, the lender you choose to go to will have deals on to absorb these costs but usually, we’ll need to factor these costs into your decision making.
From the many lenders that we (and many other brokers) are accredited with you will get a quick snapshot of what is available to you based on your current circumstances. We can talk you through the pros and cons of each and narrow down something that suits you at a better price.
Of course you can ignore all this and continue to pay the banks what they’re currently charging you.
But why would you?