From The Real Estate Conversation.
Competition for good-quality borrowers is hotting up in the lead up to spring, with lenders offering lower interest rates, fee waivers, or lower deposits for favoured customers.
Twenty-three lenders have dropped their home loan rates since 1 July, according to mortgage comparison site, Mozo.
“While Spring is traditionally peak season for buying and selling, there is an unusually high level of competition in the home loan market this year,” said Mozo director, Kirsty Lamont.
“The rate cutting frenzy is being fuelled by lender competition for ‘higher quality’ mortgage customers – particularly owner occupiers paying principal and interest repayments,” she told SCHWARTZWILLIAMS.
Preparing for the busy spring season
Lenders are positioning themselves for the busy spring season.
“Spring is traditionally buying and selling season so we naturally expect a boost in listings over the next few months,” said Lamont.
“We’re predicting that this spring, in particular, will be a bumper property season as vendors look to sell up at the top of the market, with prices expected to plateau in the next year,” she said.
Banks targeting low-risk professions, such as doctors
Some lenders are targetting particular low-risk professions. For example, ANZ is allowing specific buyers, such as doctors, to halve deposits for interest-only investment loans.
Borrowers can be saving thousands of dollars a year
While the average reduction in interest rates is 15 basis points, a handful of lenders have cut by more than double that, Mozo found.
Westpac slashed mortgage rates by up to 85 basis points this week, and waived fees on some products.
Lamont said 66 lenders now offer variable interest rates on mortgage products of less than 4 per cent.
Mozo’s research found the most competitive variable rate in the market for a $300,000 owner-occupier loan is 3.44 per cent, which is 120 basis points lower than the average Big 4 bank variable rate.
“The difference between the big banks’ rates and the lowest on the market adds up to $2,496 a year for the average borrower on a $300,000 loan,” said Lamont.
Mozo also found a number of lenders are providing cash-back offers, fee waivers, and other perks for new borrowers in time for the peak spring property season.
What do lower interest rates mean when household debt is already at record highs?
Lamont said tighter lending requirements would go some way to preventing borrowers from overextending themselves, and that borrowers should “future proof” themselves for higher interest rates.
“There is always a risk that home borrowers will become complacent and take on more debt with interest rates at rock bottom levels,” she said.
“However, we’ve also seen a flurry of lenders toughen their loan criteria off the back of pressure from APRA by lifting their interest rate buffer used to assess whether borrowers can afford to take out a mortgage.
The onus is on home buyers to “future proof themselves against mortgage stress by factoring in at least a two per cent increase in their mortgage rate,” recommended Lamont.
