Mortgage News Update - Oct 09

[Guest David Mottram]

Interest Rates Rise

You will have seen on the news last week that the federal bank has increased the base rate by 0.25% to 3.25%. The base rate was at a 49 year low and along with the stimulus packaged the government introduced; economists feel that Australia has officially avoided a recession!

The view is that we will see further rate increases in the future months to combat inflationary pressures of price rises in the retail sector. The 0.25% rate increase will add an extra $15.00 per month per $100,000 borrowed.

Fixed Rate Mortgages

Over the last few months, we have seen that the interest rates on fixed rate mortgage products, has been steadily increasing. Current 3 year fixed rates stand at approx 6.9% - 7.4% with 5 year fixed even higher.

With variable products rates currently at approx 5.25% - 5.6% many clients have indicated that they do not find the fixed rates competitive enough to look at taking them at the moment.

First Home Owners Grant (FHOG)

As from the 1st October 2009 the WA First Home Owners Grant has been reduced:

Established Properties: $10,500

New Constructions: $14,000

These will both reduce down to $7,000 as from the 31st December 2009.

Keystart Home Loans

Keystart Home Loans is funded by the WA government to help people get onto the housing ladder with low deposit options. They have recently abolished the option of having no deposit from the applicant and to just use the First Home Buyers Grant funds as a 2% deposit. Keystart now offer a maximum of 96% mortgage and require that applicants provide a 4% deposit (2% of their own money as "Genuine Savings" along with a further 2% that can be from the grant)

Genuine Savings Criteria

"Genuine Savings Criteria" is a rule that many lenders have recently introduced to help them assess cases and provide, what they would describe, Lower Risk Lending. Most lenders require that applicants now provide bank statements showing a 5% deposit has been sat in their account for the previous 3-6 months in order that they will accept the application. There is Keystart at 2% requirement and a couple of lenders that will allow 3% Genuine Savings. Applicants may need to provide a total of 5% - 10% deposit with the remainder coming from the FHOG or sale of assets like motor vehicles (these proceeds cannot be taken into account as Genuine Savings, but just as additional deposit).