With record low interest rates and banks starting to normalise their lending policies, most Aussies have seen a boost to their borrowing power – and some are saying it’s time to take advantage.
“While every person’s situation is unique and different, more people than ever before can potentially be benefitting from this ‘perfect storm’ of lending opportunities,” said Smartline executive director Joe Sirianni.
Sirianni said some of the factors in borrowers’ favour include:
Low interest rates/assessment rates: Variable interest rates are generally around the mid 5% mark, and fixed home loans are available as low as 4.89%. This compares with the long-term average variable rate in Australia of about 7%.
Smaller deposits/larger loan sizes: During the GFC, most lenders increased the required deposit size from 5% of the purchase cost of the property, to 10% which was a serious impediment to many, primarily first home buyers. Most lenders are now happy to accept a 5% deposit and some will even allow you to add the cost of lenders mortgage insurance, meaning you can effectively borrow up to 98% or 99%.
More flexibility on credit history blemishes: While it continues to be important to ensure that you keep your credit history as “clean” as possible and avoid making too many credit applications, some lenders are more flexible in regards to any credit history blemishes. During the GFC, an outstanding payment on a mobile phone account from five years ago could see you refused a home loan. Now, some lenders will accept a low level of credit defaults.
Greater interest rate discounts: While interest rate discounts offered by lenders used to be quite standard, in the past 12-18 months banks have increasingly started to use a matrix to determine the level of interest rate discount they will provide. The larger the size of the loan and the lower loan to valuation ratio, the better the rate you can secure. For example, a $700,000 loan at 60% LVR will attract a better interest rate than a $400,000 loan with a 90% LVR.
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