With each Lender having up to 42, yes that’s right 42, different variable rates & probably the same again for fixed rates, yes the Mortgage market has become ridiculously complex .Ongoing lending changes driven by APRA’s macro-prudential measures have dramatically changed the way one broker is helping his clients.
While the banking regulator’s lending curbs have been in place for some time, Aussie Parramatta principal Ross Le Quesne says that lenders continue to make pricing and policy changes “week by week”.
“You’ve got rates constantly changing, you’ve got so many variables now,” Mr Le Quesne said. “To stay across all those variables is a challenge. Not only do you have lenders changing things like credit policy and serviceability criteria, but we have to keep up with products and rates. It has never been so confusing.
“We’ve got variable owner-occupied principal and interest and interest-only rates; we’ve got investment variable interest-only and principal and interest rates; then we’ve got fixed rates for both. Times that by 20 lenders and consider that it all changes on a weekly basis.
It is probably one of the most challenging times to be a mortgage broker.”
Recent figures from APRA show that new interest-only lending accounts for 16 per cent, down significantly from 45 per cent two years ago.
Mr Le Quesne said that the rate differentials between interest-only and owner-occupier can be “extraordinary”, and these have prompted the Sydney-based broker to have very different conversations with his clients than he did 12 months ago.
“We used to do a lot of investment lending at 90 per cent,” the broker said. “You look at the rate now and it is sometimes more than a 1 per cent difference between taking a 90 per cent IO and a 90 per cent P&I, so we are having different conversations now.
“The difference on a $350,000 loan may only be $200 a month, but after five years, that client will be better off to the tune of around $15,000. This just wasn’t a conversation we would even have 12 to 18 months ago. Now we are having this conversation a lot of the time.”
Looking forward, Mr Le Quesne believes that regulation will continue to be a major theme in 2018. But he is confident that brokers will benefit as a result.
“I think this is just the start,” the broker said. “I think regulation is here to stay and compliance will be a more important part of our business moving forward. With that compliance and regulation comes opportunity. There is plenty of business to be done. Even moving to the digital age, people are going to want an expert to help them.”