First Signs of Easing...?

Its not yet spring, but this week brings some of the first signs of positive change in the lending markets for quite a while.

1. Bankwest have dropped their fixed rates a little. Now, they weren't offering the most competitive rates before, and the new rates, whilst sharper are still not the best But its about the first time this year a lender has dropped fixed rates since they started on the sudden spiral upwards. If other lenders follow this may be an opportunity to lock in a few more loans if you feel so inclined.

The Sydney Futures Exchange rate tracker is still indicating little chance of further drops with up to 1% increase in the variable over the next eighteen months.

2. Adelaide Bank, a funder of many mortgage managers has relaxed some of the credit policy changes made late last year with the re-introduction of:

• Interest Only 90%LVR full doc loans with capitalisation of mortgage insurance
• No genuine savings options for loans <80%lvr>

3. Rams have introduced a new product called 'flexi-fixed' with a 2yr fixed rate of 4.99% for half the loan, with the rest variable on their smartway. Again, not a ground breaking interest rate overall (the combined rate is more than their Basic product) but it does give some certainty for those a little nervous about being fully variable.

At Leap Frog Loans we hope these little "green shoots" are a foretaste of some competition in a market place that has been basically taken over by the pillars of our banking system (aka the big four).

till next time,

Fiona

Fixed Rates RISE....

Fixed rates have been making a steady march north the last few weeks, and we can see on the "rate tracker" at the Sydney Futures Exchange http://www.asx.com.au/sfe/targetratetracker.htm that market expectations for any further rate cuts have almost hit zero. Some commentators are now suggesting we may see a variable rate rise before the end of the year - the market is suggesting early 2010.

CBA/Colonial customers, who had been enjoying the best rate in town were bumped up 0.1% last week as CBA brought their variable rate back in-line with everyone else.

But what should you do? My feeling is that we have seen the best of the fixed rates for a time. I expect variable rates will increase over the next 12months and I suggest investors (and home owners) start factoring in repayments at higher levels - such as current fixed rates. If you start doing this now, then you will be ahead in repayments (or have a savings buffer) as well as being 'used' to it. If rates rise soon, you will be prepared, if they dont rise for a while, then you have simply increased yours savings/buffer for when they do rise.

History tells us these rates are low - they go down, but then they go up. Successful investors ride the cycle.

That said, if you see a good 'special' and like the security of some fixed rates, then that is the time to opportunistically lock in. Otherwise, why bet against the banks?

[Fiona currently has 52% of her finance on fixed rates from 1-3yrs.]

ANZ opens door to cut your Credit Limit

In a nice little announcement just before the long weekend, ANZ have advised brokers of the following change to some loan terms [our emphasis]:

"Effective 29th June 2009 a number of changes have been made to the terms and conditions for mortgage products. Most of the changes are minor. However, more significant changes have been made to specific clauses for fixed rate and equity line customers.

• Fixed Rate customers:The clauses relating to “early repayment costs on fixed rate loans”.
  
• Equity Manager and Home Equity Loan: Clauses introducing the right to: - reduce or cancel a credit limit at any time; and demand payment of any outstanding balance."

We have had concerns for sometime in this tightening credit market that lenders may move to 'free up' capital to lend to buyers by reducing unused credit limits or lines of credit that held by existing clients. Ths is clearly the first definite step in this direction by a lender - and one that has been leading the way in being cautious (they were the first to reduce LVR's).

I have suggested to some client in the past to place 'surplus funds' in a totally separate bank account - preferably with a bank you have no other loans with! Yes, this will cost you the differential between interest charged on the loan and the interest received on the deposit - but this is simply insurance that you can access the money when & if you need to.

If you have an ANZ equity facility you may want to follow this suggestion sooner, not later! It wont guarantee you get to keep access to the funds, but you will be lower down the list than someone who hasnt removed the surplus. (You might like to even go one step further and convert the equity facility to a standard loan!)

Hope you all have a great weekend,

Fiona

Lending Policy continues to tighten

Lending policy continues to tighten with several banks announcing further changes to be introduced.

LOW DOC - this space has changed dramatically over the last twelve months with few lenders still offering a 'true' low doc. Many lenders have reduced LVR's to max 60%. CBA announced this week that not only will they require 12 months BAS statements to support income declared, but now require verification from the ATO that these BAS have been lodged - hardly "low doc" at all.

HIGH LVR - these continue to fall or be restricted. recent changes include BankWest (like many lenders) now require 5% genuinue savings for all loans over 85%LVR.

ASSESSMENT RATES - the rates at which lenders assess your loan, which includes a buffer for future rate increase, has been increasing accross many lenders. ING have a 'floor' rate (minimum) or 8%, whilst AMP & The Rock have increased the 'margin' from 1.5% to 2% above current rates. This simply means you can now borrow less than you could last week, however realistically, as you can now borrow a lot more than say six months ago (due to the fall in rates) some buffer is perhaps a good idea.

Gribbet-log Launched

Wow, this has been a very simply process to set up and I wonder why I didnt do it earlier!


The aim of this blog is to provide a simply resource for property investors and Leap Frog Loans clients to be aware of:

• interest rate changes


• lending policy changes


• lending issues


• tricks & tips for mortgages and loans

Whilst we have a focus on residential property investors, we also look after First Home Buyers (FHOG), people buying a new home, upgrading their home, renovating or building.