News
Big Home Loans
Do you have a big home loan? Is it much greater than you ever imagined? How much is too much? Well, one of our major banks now has a policy that says an interest only mortgage cannot be greater than a multiple of the gross income of the borrowers (that multiple is rumoured to be 6X). While this restriction is currently being applied at one bank for interest-only home loans, I think there’s an argument to say it may be applied more broadly.
Interest Rates
You could be forgiven for thinking that interest rates occupy our minds more than any other topic. Every time a bank moves rates one way or another, it’s headline news. Even when the RBA doesn’t move rates there’s a news story about it. We’ve been conditioned to think that when you’re considering or already have a loan the most important factor for you to consider is the interest rate that you pay. If it is, it shouldn’t be.
Unseen Value-add
I used to work at a bank the CEO of which used to worship at the altar of tech companies like Apple, Google, Microsoft etc. He used to wonder why the culture of a tech company could not pervade that of a bank. Oh, and he was also originally hired into banking from a background of consulting. So, he wasn’t a banker but a professional manager of process. He, like many, had failed to see the unseen value-add of these tech companies and how that could be translated to banking.
New Beginnings
It’s always good when all the hard work we do pays off for our clients. We’ve had a record couple of months recently with the obvious reward that is associated with that. The less obvious result is what it means for the people that we work for – our clients.
Living On Your Home Loan
Living on your home loan: In the absence of wages growth and continual rise in the cost of living, people with homes have been slowly increasing their home loans. The reason for this? They’re using the equity in their homes to survive – ie, to pay for the weekly groceries, the power bills, the medical expenses, the car lease, the petrol, the expenses relating to their children…
Perfection and Reality
How’s that going for you now that policies have tightened and the bank that you borrowed from a few short years ago is not only refusing to lend you any more money to fund your growth but insisting that you reduce your borrowings and raising rates to force you to do so? Worse, they’re waving the loan agreement in your face saying they have every right to do what they’re doing.
Commercial Lending Newsletter
Welcome to our new monthly newsletter where we keep you informed with what’s going on in the Commercial Loan markets and funding that may be available to you.
Why Rates Don’t Matter
I’m yet to meet anyone that can accurately predict what rates will do over the next 30 years. Unless you can successfully pick and predict the peaks and troughs of interest rates fixing can lock you into something that can quickly become unattractive. Then, when variable rates fall you develop rate envy.
Dodgy Practices
Brokers originate around 54% of all home loans written in this country. We get paid an up-front commission by the lenders of between 0.45% – 0.70%. We also receive a trailing commission of between 0.10% to 0.25%.
Interest Only? There Are Other Ways
It seems as though the only way to change people’s behaviour is to charge them more. That’s just not true. There are other ways. But before we get into that let’s first delve into the reasons why people take out an interest only loan.