Bernie Foley
Mob: 0419 109 747 (WA FB Lic No: 2832)
Welcome to Mortgage Choice in Dianella
Cash rate rise = $50 per month on $300k mortgage 2% of first homebuyers drop out of the market thanks to decision
Much to the disappointment of existing and potential property owners budgeting for mortgage repayments, variable interest rates will undoubtedly increase over the next few days thanks to today's cash rate rise.
During its third meeting for 2010, the Reserve Bank lifted the official interest rate from 4% to a more ‘neutral' 4.25%. This comes hot on the tail of a 25 basis point increase in March.
According to a recent Mortgage Choice survey of Australians planning to purchase their first home before February 2012, the second cash rate rise for 2010 will see another two percent of first homebuyers pull out of the market if lenders match the move.
Local Mortgage Choice Bernie Foley "Most, if not all, lenders will follow suit regardless of pressure from the government, customers and other parties. Their cost of funding and competition for retail deposits will have a strong influence over this."
"A borrower with a 30-year $300,000 mortgage at 6.5% will see a 25 basis point rise add $49.60 to their monthly repayments. They will be less than $55 away from a minimum repayment of $2,000 per month.
"The March rate rise saw 2.4 percent of our recent first homebuyer survey respondents back out of purchasing in the next two years and now April's rate rise will see another 1.8 percent give up.
"The increase is definitely not a welcome outcome for these potential borrowers but it may be good news for investors and upgraders who are scouring the market for a good deal. Less competition makes purchasing property more attractive for these buyers.
"Interest rates are predicted to continue to rise throughout the year and into 2011, so perhaps it's best that potential buyers who would live close to the edge with making repayments stay out of the market until their financial situation improves.
"Either that, or it's time for them to lower their expectations on the type of property they want and its location. They may even consider the benefits of bringing friends or family onboard as co-owners, as seven percent of our survey respondents were planning to do."
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How to choose a home loan
Here are 5 essential tips that you should consider when choosing a home loan:
1. Interest rates
Interest rate is obviously important, but remember that you are not simply looking for the home loan with the lowest interest rate because there are many other considerations.
For example, the mortgage lender with the ‘best’ interest rate may have high ongoing fees and therefore your home loan may cost you more in the long term than a similar one with a higher interest rate.
Be sure to consider ‘break and switch’ costs as well because if you decide to pay out your home loan or refinance before time will you be charged exorbitant fees to do so.
Also, be wary of an introductory rate. It may be ‘cheap’ at the start but it may also revert to a much higher rate after once the introductory term has finished. You should try to negotiate an interest rate discount with your mortgage lender over the longer term.
2. Features and flexibility
What are the home loan features that you need? Home loans with the ‘best’ interest rate may not have all the features you need or be as flexible as you need it to be. For example, do you want the ability to pay extra so you can prepare yourself for future rate rises and also create a buffer if your financial circumstances change?
You also need to consider the accessibility of your mortgage lender in terms of ATM, internet, face-to-face contact, etc. Decide what you need and ask whether your chosen home loan lender has the features available.
3. Consider the current home loan approval times
Is your home loan approval time critical? If so, the lender with the ‘best’ home loan may not be able to get your loan approved in time. During peak processing periods, lender service times can vary between 2 to 20 working days.
4. Compare home loan products
Visit a reputable mortgage broker with more than 20 lenders on their panel. This way, you can research and compare a broad range of home loans and lenders all within the one visit.