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Mortgage market update

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Over the past month, we’ve seen a lot of changes in the rates and compliance areas. Some lenders have tightened the investor-lending market, which has affected auction results through some capital cities. Although investor activity has been affected, first home buyer activities have increased.

Mel Finance are committed to educating and empowering our clients, which is why we closely monitor the market and provide updates. Some of the key changes we identified as occurring last month include:

Rising demand for mortgage brokers

Mortgage brokers have taken over banks as being the primary distribution channel for a major lender. The CEO of this lender has admitted that customers do not visit physical branches as much as they used to.
ANZ recently released full-year results for the 12 months up until the 30th of September, which showed that brokers originated 56% of the bank’s home loans, or 99,680 mortgages.
This demonstrates how important the third-party approach is to ANZ, which focuses on retail banking. In fact, the majority of ANZ’s mortgage portfolio (51%) is sourced through third party channels like mortgage brokers. ANZ’s chief executive Shayne Elliot acknowledges this, being especially supportive of the broker channel when compared to his peers.

QBE property report

QBE have released a report predicting that interest rates for property investors will go above the 6% mark by 2020. Their Australian Housing Outlook 2017-2020 report indicates that interest-only investors will likely pay 6.50% for a standard variable rate, while those on principal and interest will pay 6.05%. In both predictions, there is a 25 point jump from present levels.
The report also predicts that the cash rate will increase to 1.75% in late 2019-29, which means the rates of owner-occupiers will rise but at lower levels than the cash rate. A rise of 20 basis points has been estimated, which would then push the standard variable rate to 5.45%. However, this could be beneficial for owner-occupiers, potentially resulting in lower rates. QBE’s report goes on to say that “low-risk borrowers with a loan-to-value ratio below 80% can typically borrow at a significantly lower discounted rate. Published indicator rates by the Reserve Bank suggest a typical discount on the standard variable rate by the banks of 75 basis points.”

Virgin Money slashes their rates

In great news for homebuyers, Virgin Money has announced a range of rate decreases for its owner-occupied and investment products. Beginning from 1 November, owner-occupied principal and interest mortgages and variable investment interest only loans will see lowered rates. These slashed rates are applicable for new applications submitted after 1/11/2017.

Owner occupied – Principal and interest

O/O – 3.89% NEW RATE – 3.68%
Investment- 4.69% New rate- 4.53%

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