A variable rate of 4.69%. A three year fixed rate of 4.59%. A five year fixed rate of 4.89%. These are some examples of the exceptional deals available for borrowers today as banks compete more fiercely for the record number of new loans in the current marketplace.
And it’s not just about rates either. Some banks are paying rebates to clients who refinance and one bank we know of is waiving their annual package fee FOR LIFE – a saving of more than $11,000 over the 30 year life of the loan.
Alan Hemmings, General Manager of McGrath’s mortgage broking division, Oxygen Homes Loans, says if you’re paying more than 5% on your loan today, you’re probably paying too much. I asked him to explain the current lending climate and how new buyers and existing borrowers can benefit.
“The banks are being competitive because they need to continue to grow their mortgage books,” says Alan.
“Given the products are similar, the one area where banks can compete is price. Whilst they are relying on existing customers not moving or asking for price reductions; to attract new clients they need to offer a reason to move and competitive interest rates allow them to do this.”
“While standard variable rates are still higher than fixed rates, the discounting on variable rates is bringing them in line with fixed rates. It’s vital to be aware of how competitive your interest rate is. Your home loan is one of the largest financial transactions you will ever manage. You should constantly check that the rate you are paying is competitive.”
“There are a few ways to achieve discounts. It’s not just about the amount the client is borrowing, it’s also about the Loan to Valuation ratio (LVR) – which is the amount the client is borrowing as a proportion of the value of the property. Generally, once a loan goes above 80% LVR the discounting reduces.”
For example, one lender offers the following rates for loans below a 70% LVR.
From $150,000 to $500,000 – 4.89%
From $500,000 to $750,000 – 4.84%
From $750,000 to $1.5m – 4.79%
Above $1.5m – 4.74%
However, if the LVR goes to 85%, the rates increase.
From $150,000 to $500,000 – 5.04%
From $500,000 to $750,000 – 4.99%
From $750,000 to $1.5m – 4.94%
“In order to get a better rate, you can either speak to your bank directly (they generally rely on customers not asking about their interest rates) or you can speak to a broker. Here are a few case studies showing how our team at Oxygen helped a variety of customers save significant money. You’ll see that each person’s situation was different and we were able to tailor solutions to suit their specific needs.”
- A couple from Willoughby asked us to refinance their existing two loans and establish a third investment loan. We negotiated for their new bank to cover the refinancing costs via a rebate and we reduced their interest rate from 4.99% to 4.69%, saving them $7,500 pa
- A corporate client moving from QLD to NSW asked us for a home loan health check. We refinanced to a new lender at 4.59%, saving them $5,019 pa
- A Canberra couple approached us looking to purchase an investment property using the equity in their home. Their existing loan was 5.3%, so we refinanced to another lender at 4.64%, saving them $3,234 per annum
- A bank employee asked us to check that their 0.9% staff discount was competitive (effective rate 5%). We negotiated to 4.88% with their existing bank and got a waiver on their Lenders’ Mortgage Insurance, saving them $11,000. Interest saved was $1,251 pa
- A young couple looking to upgrade to a new home (their second property) approached us for a deal. We negotiated a variable rate of 4.79% and a two year fixed rate of 4.84%. This saved them $1,250 pa compared to their existing deal
- An investor from Vaucluse asked us to help them refinance. We reduced their variable rate from 5.2% to 4.79% and the two year fixed rate from 4.79% down to 4.59%, saving them $708 pa.
Why not make it your New Year’s Resolution to have a Home Loan Health Check before work gets busy again? Clearly, there are great deals to be done and savings in the thousands for those who proactively monitor their home loan status.
