What Prospective Homebuyers Need to Know Before Buying Property
We have recently been discussing the royal commission and how it's affected many aspects of property investment. According to reports, prospective homebuyers would still find it difficult to get a home loan which is quite unfortunate if you are really looking forward to buying a house this year. In fact, seems like the requirements are going to get even more strict. The royal commission into banking was established primarily to ensure clean and honest financial services. Unfortunately, it will have an impact on the property market.
The stricter lending regulations made a lot of potential investors or buyers become cautious about purchasing a property. The government learned so many irregularities when it comes to home loan approvals that they made sure that it's not going to happen anymore. Some mortgage broking groups are said to have experienced a 25 percent drop. This was after a warning was made that the broker pay structures could potentially have an effect on their business models and competition. As mentioned before, the cautious homebuyers grew because of the interest rates and the home loan requirements. The tight credit availability has really made it difficult for many.
According to recent reports, Reserve Bank cut interest rates to the lowest point yet. From 1.5%, the bank cut it down to 1.25%. It's actually good news to homebuyers who opted for the variable rate mortgages. Not so much for people who are planning to open a savings account to put their money into.
So, how does this rate play into your mortgage?
The interest rate set by the bank, however, if we're talking about the actual rate on your mortgage, it's going to vary. For instance, new customers will most likely get lower rates as an incentive. Compared to investors, the owner-occupier borrower might also get better mortgage rates. According to research, there are three sub-categories in terms of rate: the standard rate, discounted rate, and lowest rate.
At the moment, there are very few who on the standard rate (right now it is 5.15%) because most of the customers use the discount rate. This is normally offered with a standard variable rate and credit card. Right now, it is reported that the four big banks offer a discounted rate of 4.39% with the average lowest rate being 3.6%.
What can you do to get a better deal?
Experts say that there's always a good chance to get a discount no matter what deal you get. But in order to get a better deal, you will need to do your homework. It's not enough to do research, but you, yourself will need to find out what would be the best for you by asking the banks. One way to get a better deal is to know how to effectively bargain. And you can't do it correctly if you don't have the needed information such as the competitor rates. This way, you can either choose to stay with your existing bank or not.
How do you find the best bank for you?
Some may find that a smaller bank works best for them while others don't. Many times, smaller banks offer better deals, however, larger banks offer better protection than you would think so just as long as the bank has a license, you are in safe hands. Experts say that instead of going to a mortgage broker, it's better if you go directly to the bank to discuss your options. Mortgage brokers would often give you an offer based on the amount they will get from the lender and which would give them more.
In terms of the future, many experts are predicting that there will be more interest cuts to the rates. Although things might change, it is the most likely scenario.