Competition returns to Banking!
It’s a positive sign that competition has returned to the lending market when the NAB is running full page advertisements in national newspapers and taking a direct approach to try and win customers over from CBA and Westpac. And we don’t believe it will be long before similar marketing campaigns are launched back the other way.
The last few months have also seen the return of 95% loans for first time buyers something that had all but disappeared in the wake of the Global Financial Crisis.
Part of the renewed competition between the Big 4 is as a result of the acquisitions or consolidation that occurred in the last few years which has resulted in less market share and competition from the second tier lenders like St George, Rams and Bank of Queensland.
For Consumers it draws attention again to the wide variety of home loans and lenders available. So how do you look beyond the fancy marketing campaigns and understand the true value of any incentives and focus on comparing the real substance of home loan products available today?
As competition returns we believe we will see an increase in the number of well-priced, innovative home loans. However, it will make the mortgage market more complex for borrowers. Working with an experienced mortgage broker with a large lender panel can help save time, money and confusion,
The benefits though of any switching of lenders must outweigh the overall cost of doing so, and not just be a kneejerk reaction to an upfront offer that a lenders offers just to get your initial bussiness.
So here are our top tips when thinking of refinancing.
• Check your loan statement or loan offer to find out what product and interest rate you are currently on. Most mortgage holders are on standard variable home loans with the major bank and more than 50 per cent of those consumers are paying an unnecessarily higher interest rate
• Think about the features of your loan. Are there features you are paying for and aren’t using or don’t have and need? You should always consider the fees you’re forking out and the cost vs. benefit equation for switching loans and/or lender
• Can your home loan (owner occupied debt) work better for you? Are you throwing lump sums into the loan account when possible e.g. your tax return, bonus or leftover wage? Every cent counts in helping to reduce the interest owed and the loan term. Contributing more when you can helps build your financial buffers and gives you additional funds for your next investment.
• Consider extending your loan term or consolidating some debt. Stretching your debt over a longer period does attract more interest over the life of the loan and for many people this can be an emotive issue but keep in mind it could help you fund another investment property.
With tighter regulation in the mortgage broking industry you should think of your broker / strategist as being a professional in the same way as your accountant, financial planner or solicitor.
Chan & Naylor Mortgage Strategists look to build ongoing relationships with our clients and think of your best interests and not those of the bank. If we are your chosen trusted broker keep in touch with us at least annually for a review; but when times are volatile feel free to contact us as frequently as you like to discuss your options in this ever changing market.
This month why not contact Chan & Naylor Finance who can give your mortgages a ‘health check’ for the year ahead.