Written by Alan Loke of Your Finance Group
Should you refinance? What interest rate should you be paying? Can I borrow and what are the banks looking for? We know that the banking and finance sector has drastically changed in the last few years and that the changes have heavily impacted the property market.
We have asked Alan Loke one of our most experienced and trusted brokers his thoughts and to give you a 5-minute finance update.
FEEDBACK ON BROKERS
A recent independent survey by Deloitte Access Economics showed more than 90% of surveyed new borrowers clients were satisfied with the service and attention they received from their broker. This explains why close to 60% of all home loans in Australia now are written by mortgage brokers as borrowers realise going directly to just one lender may not be in their bests interests if they are looking for a competitive product with low rates and fees.
Why are mortgage brokers becoming even more popular? Because we seek the best options for the clients, not the lenders and we provide more alternative than just a single bank option.
The major advantage of dealing with Your Finance Group is our large team of committed and dedicated brokers, all with many accreditations with a wide range of lenders and the team happily work together to provide excellent service to our clients.
LENDING IS TIGHTENING
In the last 18 months lending policies have significantly tightened and generally, borrowers can now borrow less than they could previously.
Part of this lending tightening is much closer scrutiny of a borrowers living expenses. Lenders now require borrowers to prepare a living expenses budget which they then cross-reference to their account statement transactions looking for missed ongoing payments and expenses not listed in the budget. Examples of expenses the lenders are looking for include childcare, Foxtel, mobile phones, gym and sporting memberships and for payments to other loans and credit/store cards. Some lenders are now going back over 12 months statements (yes 1 year) looking for these expenses!
With the ongoing Royal Commission, we do expect banks will continue to tighten up their credit policies which will further restrict the maximum amount people can borrow.
It is always best to consult a finance broker in the early planning stages to avoid disappointment at a later stage as the credit policies change frequently at the moment.
REFINANCING TO SAVE MONEY
It is important that borrowers review their financial situation every 2 years to ensure their loans are competitive in the market. Failure to do this could result in paying more interest and fees than is necessary and who can afford to waste money nowadays?
Before considering refinancing though, we at YFG will look at a client’s present loans, the interest rates and the terms of loans and then calculate the savings of any potential refinance before the client makes their decision.
Recently an applicant who was considering a refinance to another lender contacted us and it was realised one of the loans was a fixed rate loan. If this loan was refinanced ahead of the end date of the fixed term, it would result in substantial fee penalties to the clients. The clients were advised it was financially best to wait till the fixed rate ended and to assist the client. We then contacted the existing bank and requested a lower interest rate for the non-fixed rate loans. Happily, the bank agreed. This work was done free of charge to the client.
BANKING ROYAL COMMISSION
Sadly, Australia’s banks have suffered one scandal after another over the past decade. The Banking Royal Commission brought this all to the forefront and the revelations have been breath-taking. Issues identified include flawed internal compliance structures, incorrectly charging fees for service not provided, bank investment staff offering questionable advice to their clients and many more issues that were not in the best interests of their clients.
We at Your Finance Group (YFG), are proud to say as early as 2017 were in favour of a full Royal Commission into the banking system which will now force the big players in the market to clean up their act and stop putting profit before everything else.
“Everyday heroes…going beyond”
Disclaimer The information contained on this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations there may be delays, omissions or inaccuracies in information contained on this article. Accordingly, the information on this article is provided with the understanding that the author(s) and publisher(s) are not herein engaged in rendering professional advice or services. While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Empire Estate Agents is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on this article is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Empire Estate Agents, employees or agents, be liable to the reader or anyone else for any decision made or action taken in reliance on the information on this article or for a any consequential, special or similar damages, even if advised of the possibility of such damages.