Good Morning and Happy Tuesday,
The good news is I am in the middle of expanding my team and increasing my capability and ability to help you and our clients better.
Not much on the interest rate front other than ANZ increasing their headline 2 year fixed rate from 2.19 to 2.29%
They did however come out with the an ability to go to 30 years on a commercial loan, usually 25 years is only available with a very few lenders. These loans will need to be fully secured by property and will only be available on assessment so they wont be available on every kind of loan. Even so, 30 years is going to give clients an ability to reduce their repayments, because as we all know cash flow is king!
Some lenders have stopped their pre-approval applications and all of the smaller non bank lenders have advised that they no longer have places available on the First Home Loan deposit Scheme meaning clients who want a place need to go to one of the majors.
This week there were several articles out around the risks of fixed loans and how banks will need to step up their game when looking at clients affected by COVID and the downturn in the economy.
Fixed loans can make life easier for those borrowers who want certainty around their repayments. The risk with these kinds of loans is that if the market continues to fall then those clients can be in loans higher than what is currently available, as well as the fact if you try to get out the financial cost can be huge. I know this from personal experience as I fixed a loan for 4 years in 2007 at 9.99%...
After GFC hit and rates were rates at 5%, I approached the bank and wanted to refinance, as my own income from the job I had at the time had its own downturn. With 18 months to run the break cost was $40,000. Suffice to say I just stayed there. That whole experience was one of the factors that led me to become a finance broker. The bank gave me no advice around what loan might have been suitable, what the risks were, I had a basic understanding that rates might rise or fall and mine were locked in. There was no mention of how I could pay the loan down faster. I didn’t use a broker either, I was at the time of borrowing firmly stuck in the old school way of borrowing because that’s how my parents did it and my grandparents.
We all know that banking and borrowing money has gone through some massive changes in the last ten or so years. The days of having a bank manager to rely on, who understood your business and had delegation to lend are gone however this is where I come in.
Banks in general rely on past data to assess whether you can afford it or not, they stress the payment to cover themselves for compliance and potential litigation.
Finance brokers should be and see themselves as the new bank managers, with access to multiple lenders and an ability to look at the clients overall position not just the data from the past. Being able to give a client greater options than a yes or no, and being able to offer the advice on what will work best, how to get rid of the debt faster and how to keep money in the clients pocket is what any finance broker worth their salt should do.
Let me know if you or your clients need any assistance this week.
JC
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