The lack of transparency in the current home loan market, complicated pricing arrangements and the ever changing policies around investment lending, makes deciding on the right home loan more difficult than ever before.
The home loan market also once had a degree of stability surrounding the official cash rate, but now lenders are routinely ignoring the Reserve Bank Board, and raising rates independently – even higher for interest-only loans. This has caused further confusion for borrowers, with the majority of lenders now having different variable and fixed rates for owner occupied debt versus investment debt, as well as a difference in rates for principal and interest versus interest only borrowings.
With the current restrictions put in place by regulatory bodies surrounding interest-only and investment lending, the rate differential between owner-occupied lending versus investment lending can be upwards of 0.80%.
Further increasing complexity for potential borrowers, over the last few years banks have increased discounts available off the standard variable rates. Banks advertise discounts up to 0.90% via packages that bundle products together, including transaction accounts and credit cards. However, there are also further unadvertised discounts that may be offered over and above these rates for new to bank customers or if the customer has borrowings above a certain level.
All of these variables make it tough for borrowers to make an informed choice on a lender, loan and product features in the current interest rate environment.
When embarking on a home loan, it is important to compare "apples with apples,” in terms of product, pricing, features and benefits, and ensure that these are in line with your financial needs and goals. A good mortgage adviser can assist you to navigate the complicated lending environment, and select the right product for your financial situation. If you are thinking about securing a new loan, or refinancing, speak to one of our lending advisers today to help you unlock the ever changing mortgage market.
This article was written by Adam Connelly, Lending Adviser.