HOME LOAN MARKET UPDATE | FEBRUARY 2019

Royal Commission recommendations impact Mortgage Broking industry

In this month’s monthly market update we change tact and discuss the recent Royal Commission (RC) recommendations on the mortgage broking industry and how we are paid. To the great surprise and disbelief of many the RC has recommended banning all commission’s that are currently paid by the bank to mortgage brokers and pass this fee directly to the customer by recommending a fee for service model.

This would mean it would become more expensive for customers to apply and secure a home and investment loan. It would also kill competition as it would eliminate smaller lenders who rely 100% on broker originated loans (and keep the market competitive) and play into the hands of the four major banks who have a large branch network. This would more than likely see interest rates increase, your monthly loan repayments go up and buying a property/securing finance more difficult than ever. It would also see the four major banks profit margins escalate to unforeseen levels as they return to dictating the home and investment loan market without adequate competition.

If you are one of the 60% of people that rely on the personalised service and advice of a mortgage broker and would like competition to remain in the home loan market then you can join the fight. Please go to brokerbehindyou.com.au and sign the petition. I really appreciate your support.

CLIENT ACTIVITY: PRICE DECLINE PROVIDING OPPORTUNITIES

Young couple secures Brighton property | Renters buy out Landlord

Our most active clients continue to be first home buyers and property up-graders who are taking advantage of the recent decline in Melbourne property prices.

Last month we had a young couple purchase a bayside property in a premium Brighton location located on 395 square metres. This property was most likely out of their budget just twelve months earlier. Because we had arranged a loan pre-approval, they were able to act quickly and put in an unconditional offer, this offer was accepted. If they had not had a loan pre-approval then their offer would have been subject to finance and the vendor would be less flexible with their selling price. Our clients also were in the fortunate position of being able to keep their existing bayside villa unit and convert this into an investment property. They can then decide to sell this investment property when the Melbourne property market conditions improve.

Another good example of our clients taking the opportunity in the current Melbourne property market are a young family who have been renting a property in Williamstown for three years. They decided to approach the landlord and put in an offer on their rental property. Although they did not have a loan pre-approval, they were existing clients and we were able to do a borrowing capacity analysis and indicate their position so they could confidently make a quick offer. After some negotiation the vendor accepted. This property is located on a substantial 700 square metre block and the bank valuation came in at $100,000 above purchase price which gave our clients some additional comfort. When finalising our clients finance, they decided to fix 80 percent their loan over two years at 3.75% and the remaining 20 percent of the loan was variable, 3.82% with an offset account. The variable portion gives them the flexibility of making additional repayments on their loan and the fixed portion protects them against future interest rate increases and makes budgeting simpler. This split loan structure is becoming more common with our clients as the fixed home and investment loan rates are currently very competitive.

INDUSTRY ARTICLE

Thousands sign petition supporting Brokers

Each month I’ll try and provide some additional reading that I think you may find interesting. This link below is from the Australian Broker e-newsletter and reinforces the impact the suggested recent changes may have on the industry.

Australian Broker – Thousands sign petition supporting Brokers

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