The country’s biggest banks are using cheaper rates to entice home buyers into fixed-rate mortgages after the central bank’s decision to cut interest rates has been unsuccessful at stimulating activity on the property market. Approximately 90% of Aussie home loans are floating-rate mortgages, meaning that the rate cuts have not been so effective at boosting activity. This is coupled with widespread concerns that the rate cuts would drop the value of homes.
Australia’s borrowing costs are considered to be the cheapest long term rates in the developed world and investors are wagering that the central bank will be looking to drop the cash rate by a further 73 basis points over the course of the next year. This would enable lenders to reduce fixed rates to resuscitate what is the slowest rate of lending since records started being kept in 1977.
Commonwealth Bank, Australia’s biggest lender, has extended four and five year loans at a rate of 6.14%, the lowest rate in nearly a decade, and a 6.8% rate on variable loans. Westpac, Australia’s second largest lender, has slashed its one year interest rate to 5.69%, the lowest available rate since September 2009. In response Westpac claims to have seen a steady increase in home owners changing to fixed rate loans but claims that the stiff market competition is what has driven it to decrease the rates.
In the period leading up to August 31, house prices in the country’s state and territory capital cities have dropped by 2.4%. Fixed rate mortgages follow a unique trend that sees them swop over to a floating rate once the initial term is over, in contrast to other developed countries where the rate remains fixed for the entire duration of the contract.
The Brisbane Times reports that buyers who are prepared to spend a little extra time rate shopping could save themselves tens of thousands of dollars in the process. A $300,000 loan on a variable rate of 6.35% could amass the borrower an additional $28,000 in savings if they switch to an interest rate mortgage of 5.59% over the term of a 30 year loan.
So what are the deals? Well, currently the most competitive rates are structured between 5.79% and 6.17%. Bankwest’s Online Home Loan, available at http://www.bankwest.com.au/personal/home-loans/home-loans-overview, leads the rate race at 5.79%, followed by CBA’s No Fee Variable Home Loan at 6.10%. My Home Package from Suncorp is on offer at 6.11% followed closely by ANZ’s Simplicity Plus Package at 6.12%. St George’s Advantage Package completes the top five with 6.17% interest offer.
The key to savings, according to the experts is a combination of online shopping and tough negotiation skills with lenders. The success of comparison rate sites has sent many of the banks into cyberspace to flaunt their deals and attract buyer attention. It is important to take note that the deals are not being marketed to first time home buyers but rather to buyers with higher capital loans and equity. Some deals are also only available to those seeking refinancing on their mortgages.
The removal of exit fees by government last year has made the mortgage comparison process a lot easier for potential home buyers. Lenders were enticing borrowers into home loans with what have been termed ‘honeymoon rates’ and locking them into paying higher fees after the honeymoon periods ends, using exit fees to prevent them from getting out of the deal.
Banks are more negotiable than online loans these days, the latter has already factored discounts into the fees that are publicly available and tend to be less flexible because the deals are already highly competitive. For borrowers who have a good credit rating and substantial equity discounts are generally commensurate with the size of the loan being applied for.
Article publié pour la première fois le 02/11/2012