‍With one-year rates in the mid twos, surely now is the time to lock in for the long run? Or is it? Or should the real question actually be about constructing a good debt reduction strategy? Brendon addresses these questions, plus the slowness of banks and the new 80% loans for rentals.

Banks are currently offering 2.55% for one-year fixed rates. It is pretty hard to go past this rate. I say that for a couple of reasons:

1)     The one-year rate is currently the lowest in the market

2)     Rates MAY go slightly lower. If so, fixing for a year MAY mean rates will be even lower when a one-year fixed rate comes due. Then you can fix at another low rate for the next period.

3)     Most people “in the know” aren’t predicting rates to rise in the next year or so. IF they are right, why would you fix longer and pay more? (The answer to this is of course, IF rates do go higher, you will be paying more in a year when a one-year fixed rate rolls off, however that isn’t the mainstream thinking right now.)

We have interest rate conversations every day, and it is important to get it right, but what is even more important is a good debt reduction strategy. How can I structure my loan, given my current circumstance, to allow me to get ahead financially?

Do give us a ring and we can talk this through with you. And, while we’re talking banks, there a couple of other new developments to address:

Waiting Two Weeks for Approval

For some reason (this reason is not particularly clear and is probably caused by the perfect storm of factors) banks are incredibly slow right now. I have been doing this job for 15 years and the turnaround times we are seeing from banks is the worst I can recall. So …

1)     Please act quickly. Don’t wait until the day before a tender to ask for finance—it just won’t happen.

2)     Please be patient with us.

3)     We will do our best to be realistic with our estimated time frames and keep you updated throughout the process.

80% on Rentals is Now a Thing

You may have heard a few months ago that the Reserve Bank abolished the “LVR” rules, meaning banks can now make their own decisions on how much deposit they require their customers to have.

Banks haven’t loosened up for first home buyers (in fact it is as tough as ever to get a home loan with a 10% deposit).

Banks have tightened up on deposits needed for build deals (they are concerned about the potential value of the house when it is finished in say a year’s time.)

BUT they have loosened up on the deposit needed for rental properties. For some time, investors needed 30% deposit/or equity to purchase rental property.  It is now 20%. 

If you are thinking about rental properties, let’s talk, and we can help you determine the best options for you.

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.