Interest rates have been in our news feed for the best part of the last two years, due to the Reserve Bank’s rate reaching an all-time low of 1.5%. Many are suggesting that our economy is about to hit a recession, but it’s good news for homeowners (who have a variable rate) who are enjoying reduced repayments that come with the rate cuts. It’s becoming easier for potential first homeowners to get into the property market, and it’s driving competition among banks, with some lenders even slashing rates to below 3%.
Recently, Well Home Loans has announced a rate of 2.74%, and even the big banks are cutting their own rates. Westpac slashed its rates by 1.30%!
But are these “too good to be true rates” available to everyone?
Whilst a 1.30% rate cut certainly grabs your attention, the cut they’re referring to is the 4-year fixed rate. The reason this isn’t big news is that it’s very uncommon for someone to take out a fixed rate for that long. It’s not often that you can predict your situation in four years’ time, so it’s generally not recommended to fix a home loan for that length of time. The good news is that usually current fixed rates are a good sign of what’s to come, so we can probably expect another rate cut from the standard variable in the coming months. Banks don’t gamble, so it’s fair to assume that if they’re lowering their rates on fixed loans, the variable rates will be heading in that direction also.
The average person on the street might not know this, but a finance broker certainly would. Brokers speak with banks on a daily basis and understand the finance market. So, rather than attempting to predict the future with interest rates, why not get a broker on your side to do the leg-work for you?
Here are our top reasons on why to engage a mortgage broker:
Protect your credit file
Brokers give a non-biased comparison of the entire market, specific to each person’s individual circumstances. A lot of people make the mistake of submitting an application online after they’ve seen an attractive rate, then find out that that particular lender doesn’t accept their circumstances for whatever reason. One of the problems with this is that it creates a credit enquiry on your credit file, and the more of these you have, the harder it is to get finance.
Brokers know what a lender’s ideal customer looks like
Brokers do all their research upfront so that when they make an application, they’re confident of it being approved. They also know which lenders prefer which applicants. At the moment, lenders are changing their policies quite often, and they all view each applicant differently. For example, clients who are self-employed may have a high borrowing capacity at one bank, however, may not even qualify for a loan at all with another bank – brokers know these policy niches and can steer you in the right direction.
Brokers are incentivised to work for you
Once you’re with your bank, the banker is not going to be calling you to let you know that you can save money by switching products, etc. Brokers are definitely incentivised to do this, otherwise, they’re at risk of losing your business. Brokers are also heavily reliant on repeat and referral business, so it’s really important that they keep their current client-base happy and up to date.
Brokers have increased bargaining power
Often, brokers can get better discounts than individual applicants. A broker has the potential to bring millions of dollars of business per year to each lender, plus also have their finger on the pulse when it comes to what other banks are doing, which means they carry increased negotiating power.
So, next time you see a rate that seems too good to be true, reach out to a broker before submitting the application. They can make sure it’s the right product for you, and may even know a different product that would suit you better. Contact our finance brokers if you need any assistance with home loans, and remember, if you haven’t reviewed your loan in the last 12-18 months, we can probably reduce your repayments and save you money!