Your Local Seaford Mortgage Broker
Forget the cash rate decision, have you health checked your home loan lately?
Today marks a half-year respite from cash rate rises for the Australian public. There will be cheers from most mortgage holders and sighs from a number of savers, many of whom are enjoying the benefits of competitive tension between banks and other deposit taking institutions.
As are many Australians, Mortgage Choice is relieved to see the cash rate remain on hold at 4.75%, but it urges existing borrowers to still investigate their home loan alternatives.
Not only is there a vast array of special offers and incentives floating around in today's marketplace but many lenders' retention departments are working at top speed. Competition to retain and attract customers is hot.
You never know if a better home loan deal is out there until you shop around. Consider the possible savings if you negotiate with your current lender or find a more affordable or suitable product from another. A professional Mortgage Broker with a large lender panel can help with this.
Flight to ongoing discount home loans continues
Ongoing discount interest rate home loans are now the top choice for 33% of new borrowers, according to May 2011 data from Australia's largest independently-owned mortgage broker, Mortgage Choice.
This is almost double the 17% approved in November 2010 and up three percentage points on April 2011. It is the second month this loan type - where the interest rate is discounted over the entire loan term usually in return for an annual fee - has won the most popular award.
Every state apart from SA saw a rise in demand last month for these variable rate loans. NSW led the pack with 42% of all approvals.
Variable rate products remain the clear favourite of today's borrowers, at 89% of approvals. Fixed rate loan demand has moved only slightly between 10% and 12% for four months now. Appetite dropped one percentage point from April to May, to 11% of approvals.
Local Mortgage Choice franchise owner, Robyn Lang said, "There are some highly competitive deals on the table for new borrowers just as there are for those looking to refinance. Get out there and get amongst it if you're looking to enter the market. Take a good look around."
"Many lenders, large and small, are enhancing their product offerings in an attempt to pull more business into their books. This increases the negotiating power you have as a borrower, especially if you work with an experienced mortgage broker that has a large lender panel.
"Anyone who hasn't at least explored their options could easily be giving themselves a raw deal by simply going with their everyday lender or ignoring the possibility of switching to a better suited or more affordable home loan."
The second most popular loan type for May was standard variable rate, at 24%, closely followed by basic variable rate, at 23%. The popularity of line of credit home loans, often more popular with investors, rose one percentage point to 5% of approvals as did introductory rate loans.
High profile lender 'break ups' to benefit consumers
Time to research a home loan switch with substance
Australia's largest independently-owned Mortgage Broker, Mortgage Choice has been calling out for some time for a more competitive home loan market. It is happy to see a proactive handful of lenders engaging in a potentially market share-nabbing advertising and public relations war.
Things are looking healthier for borrowers these days thanks to a couple of the major banks and a number of other lenders introducing a range of incentives to encourage people to switch.
However, buyers must be cautious of moving until they understand the true benefit vs. cost equation.
Local Mortgage Choice franchise owner Robyn Lang said, "I'm excited to see a further awakening of lenders' competitive spirits within the home loan space."
"It will benefit many borrowers by heightening their awareness of the wide variety of home loans and lenders available. Let's just hope they look beyond fancy marketing campaigns and understand the true value of any incentives. My advice is to focus on comparing the real substance of home loan products available today. The benefits of switching must outweigh the overall cost of doing so."
"The new offers, including lenders offering to pay switch fees and providing interest rate discounts, should spur more fed-up borrowers to shop around. I am already observing a significant spike in borrowers researching their options."
"It is also interesting to note that our 2010 Refinancers Survey found those who switched loan product as well as lender saved more per month than those who simply switched products. Further, those who used a mortgage broker were more likely to switch both and to save money from doing so."
A borrower with a 30-year $300K principal and interest loan at 7.3% can reduce the interest owed by almost $22K over the loan term if they switched to a 7% rate loan. Going from 7.6% to 7% reduces it by over $44K. Of course, this does not take into account possible exit fees, set up fees, ongoing fees and lenders mortgage insurance but it does provide an idea of the difference switching can make.
"I really hope we continue seeing a rise in well-priced, innovative home loans. However, it will make the mortgage market more complex for borrowers. Working with an experienced mortgage broker such as myself who has a large lender panel should help save time, money and confusion," said Robyn.
Refinancing resources:
Refinancing infographic: www.MortgageChoice.com.au/tips-and-checklists/refinance-home-loan-infographics.aspx Home loan product comparison calculator: www.MortgageChoice.com.au/calculators/home-loan-comparison-calculator.aspx Other home loan tips, checklists and news: www.MortgageChoice.com.au/robyn.langHighest % of approvals in over 2.5 years31 months have passed since Australians' demand for fixed rate mortgages was at such a high level, according to loan approval figures from the country's largest independently-owned Mortgage Broker.
Mortgage Choice customer data for December 2010 shows the year ended with a bang for fixed interest rates, as appetite for such loans increased. For the third consecutive month, every state saw a lift in their uptake despite the continued rising cost of fixed rates.
Local Mortgage Choice franchise owner, Robyn Lang said, "Australian borrowers' demand for fixed term mortgages has reached a pace unseen for over two and a half years, at 15.2% of our loan approvals in December, despite the cash rate being much lower now than back then."
"Fixed term loan approvals rose four percentage points over the month to more than double the six month average of 7.1% and more than triple the 12-month average of 4.6%.
"Much is being written about the cautious attitude of Australians and our latest data reflects that. Many mortgage holders are locking in the interest rate on part or all of their loan so they can better control their ability to meet repayments.
"It's obvious that concerns about utility bills and other living cost hikes along with predicted rate rises for 2011 are having a noticeable effect on the purchase decisions of new borrowers. Home loan commitments are no exception."
However, standard variable rate loans continue to hold relatively steady as the favoured home loan type, at 32.9% of approvals, followed by basic variable loans at 25.1% and ongoing discount loans at 21.2%.
The latter type of loan - where the interest rate is discounted over the entire loan term (most of these would be
professional package loans) - experienced a significant rise of 4.3 percentage points in December. This also reflects the growing conservatism of new mortgage holders.
Line of credit home loans (often popular with investors) rose to 5.4% of approvals from 3.8% while introductory rate home loans accounted for only 0.3% of all approvals in December.
Call Robyn today on (03) 9786 7773.
Note: Mortgage Choice writes around one in 25 new home loans in Australia, equating to over $10 billion in approvals per year, hence providing a clear insight into borrower preferences. The 18+ year old mortgage broker has a loan book of over $40 billion.
Fight back: Health Check your home loanIt's time to take control of your mortgage situation. Don't sit back and hope for the best while interest rates rise around you. Health Check your home loan now.
Did you know that a borrower with a 30-year $300,000 home loan who switches from a product with an interest rate of 7.8% to another that is the same apart from a 7% rate will save almost $164 per month and just under $59,000 over the loan term?
We suggest these steps for researching refinancing:
Ask your lender about your exit fees. Note this when weighing up the upfront costs of moving to, and setting up, another loan versus the overall savings. It may be cheaper than you realise or enough to keep you from moving. Either way, it's better to know than wonder. Negotiate with your lender for a better deal. Your lender may want your business enough to sweeten their offering.Understand what you really need in a home loan. Interest rate is important but it's not everything. There are many loan features available and some have ongoing fees attached. Perhaps you can save money by dropping features you don't use.Research the market to see if there's a better home loan that's tailored to your needs. Trawl the internet, call a wide range of lenders or have a Mortgage Broker research for you.Consider the pros and cons. Add up your current loan's exit fees and the new loan's set up fees plus any other initial and ongoing costs. Compare that with the savings you will make during the time you will stick with this new loan.What you probably don't know about Mortgage BrokersShopping around is the key to getting a good
Set resolutions to repay your home loan sooner
This year's tips for budgeting, spending and managing your mortgage
Becoming a better budgeter, wising up on spending and making the most of any savings can help borrowers master their mortgage and own their home outright sooner, according to Australia's largest independently-operated mortgage broker, Mortgage Choice.
Company spokesperson, Belinda Williamson said, "If your goal is to pay off your home loan sooner, the beginning of the year is a great time to set new financial resolutions."
"Challenge yourself to ramp up your home loan repayments by readjusting your budget and finding ways to make extra contributions to your mortgage.
"Well thought-out saving, spending and loan repayment strategy decisions can help put you months or even years closer to living mortgage free. Keep in mind even small financial changes can have a big impact on how much interest you pay over the life of your loan and the length of your loan term."
Mortgage Choice offers these financial resolutions to help borrowers own their home outright sooner:
Resolution 1. Become best buddies with your budget
If you don't already have a budget, the New Year is the ideal time to start one. Ensure it factors in all your regular spending - home and/or other loans, utility bills, medical expenses, memberships, grocery bills, insurance costs, etc. Don't forget to include funds for socialising treats. Be honest with your budget and refer to it each time you contemplate a new expense.
Resolution 2. Slash your cash limit
Consider ways to cut your daily spend. For instance, a daily caffeine hit at $4 per weekday equates to $80 per month. Did you know by making a coffee an every-second-day spend and contributing $40 extra per month to your mortgage from day one (based on a $300,000 loan over 30 years at 7%) could reduce the total interest owed by around $31,000 and the loan term by almost 2 years?
Resolution 3. Review your home loan with a fine-toothed comb
There could be underutilised loan features costing you money or features worth refinancing for. Get to know your loan's features. Your mortgage broker can help review your current loan and its features and identify any opportunities to shop around for something better suited to your goals.
Resolution 4. When rates fall, keep repaying more
If your home loan's interest rate has recently fallen, consider keeping your repayments at the higher, pre-fall rate. For example, take a home loan of $300,000 at 7% over 30 years. If your rate reduces to 6.5% and you keep repaying your loan as if the interest rate was still 7%, you could shave approximately 4 years off your loan term and save around $60,000 in interest owed.
Resolution 5. Make the move from monthly to fortnightly
Switching your monthly repayment to fortnightly may make a significant difference to your loan term and the interest owed. There are 12 months and 26 fortnights in one calendar year; by paying fortnightly, you make the equivalent of 13 monthly repayments. The savings, based on a $300,000 loan at 7% equates to around $103,000 in interest and about 6 years and 6 months off the loan term.