The mortgage market is fiercely competitive, with banks and brokers alike keen to bring on new clients. If you’re in the market for a home loan, it’s important to understand when you’re being lured in and whether the bait is right for you (we just couldn’t resist extending the fishing metaphor!). Similarly, it’s important to be aware of the current credit market and the factors lenders are taking into consideration to approve your loan.
We’ve highlighted three aspects of the market today that you need to be aware of.
Nice rates and deals
New property settlements traditionally drive home lending volumes, however, as these slow down, one lever that some banks have adopted to generate new-to-bank business is to offer large cash rebates on refinances and new purchases. On the surface this can look very attractive, but you need to weigh up what is most important to you.
Whilst these rebates, often between $2000-$4000, are no doubt tempting, often getting in line to secure them can have an impact on your borrowing timeline.
Long turnaround times
One major bank during their rebate campaign had a turnaround time of 40 business days before they would even look at an applicant’s file. If the bank, then requests more information the file is then placed back into the queue resulting in huge delays. While this is an example during a rebate campaign, long turnaround times are not uncommon with some of the major lenders.
Naturally delays cause frustration and in addition to the delays, refinance clients remain customers of their incumbent lender for longer. Presumably, the longer you stay customers of your existing lender at a higher rate the more you are eroding the savings and rebate benefit if you had perhaps selected a lender with quicker turnaround times and hence crystallising the savings a lot sooner.
If you’re a new buyer, when it comes time to purchase your dream home timing is everything and you may need to work quickly. Long delays with credit approvals can often result in people not having approvals before auctions and can cause you to miss out on the property you are interested in.
The importance of Debt to Income ratio (DTI)
With interest rates so low, and cash accounts earning very little interest, we are seeing an increase in appetite for property investment. And with rental repayments often equalling interest commitments, it’s easy to see why this makes a lot of sense.
But, you still need to be eligible to secure the loan. Over the last 6 months an area of focus/scrutinisation for the banks has been around aggregate debt levels versus your income. DTI has always been a factor in the overall assessment however it has never been more important than right now.
Whilst every bank is different, the overall DTI level now plays a much greater part in the approval process. We are seeing some compromises within lenders still considering higher DTI loans but often at a reduced loan to value ratio (LVR).
There is no doubt that there are a lot of attractive rates and offers being dangled in front of buyers at the moment. So, for people thinking of entering the market, building their portfolio, or simply looking for a better deal, now is a great time to speak with your lender and find an option that will best suit your needs.
The Credabl team is available to chat live on our website www.credabl.com.au or you can call one of our specialist lenders on 1300 27 33 22.
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