Lenders dramatically reduce mortgage rates and mortgage default insurance (LMI) costs in the run-up to widely expected decrease in cash rate on October 6, but uncertainty grows as to when the reduction could take place.

Eleven lenders, including Commonwealth Bank and ING, have pinpointed homeowner and mortgage rates. investor mortgage in the past seven days alone, while two lenders have offered LMI discounts to attract first-time buyers.

Online lender Pacific Mortgage Group today cut its one-year fixed rate by 20 basis points to 1.99% for owner-occupiers, making it the 12th lender to join the under 2% club.

He also introduced a variable rate of 1.99 percent for those with a loan-to-value ratio (LVR) of 60 percent.

ABC reduced its lowest variable rate of 10 basis points to 2.69% last week, while Australia’s fifth lender, ING, also cut its variable rates by 10 basis points for new customers who live in their own homes , with its lowest variable rate at 2.49 percent.

Illawarra Credit Union achieved last week’s biggest drop of 1.65 percentage points in its homeowner variable rate, bringing it back to 2.59%.

Other players that have cut mortgage rates include non-bank lender Homestar Finance, which cut rates to investors to a record 2.18%, and Tic Toc, which cut its two-year fixed rate to 2.09%.

The average reduction across the whole of last week was 25 basis points, according to RateCity records.

Fifty of the 57 mortgage rate cuts during this period were for variable rates.

Westpac changes forecast, expects rate cut in November

The mortgage rate cuts come as Westpac revised its forecast for the Reserve Bank of Australia (RBA) rate cut. The bank previously expected the RBA to cut the policy rate by 15 basis points to 0.10% on October 6, the same day the federal budget was tabled. Now, Westpac predicts the reduction will occur when the central bank’s board meets on November 3.

Big Four Bank Chief Economist Bill Evans said the RBA might want to refrain from cutting the spot rate at its October meeting because it might not want to distract from it. the announcement of the government’s federal budget.

“A central bank that moves on budget day could be interpreted by the government and the bank itself as distracting from the budget and making it harder for the government to ‘sell’ the budget,” he said. .

“The governor himself, who has been such a strong supporter of fiscal policy, can also see the benefits of leaving space for the government to promote its budget.”

AMP Capital’s chief economist Shane Oliver hasn’t changed his view that the RBA is likely to cut the budget day cash rate.

“We continue to expect further easing from the RBA, possibly at its October meeting to present a united ‘Team Australia’ front with the federal government, as it is the same day as the budget,” he said. he declared.

Speculation around a potential rate cut began to mount after RBA Vice Governor Guy Debelle mentioned the possibility of further cutting interest rates “a little more without going into negative territory” in a speech online last week.

Lenders look to LMI offerings for competitive advantage

Lenders are look beyond lower interest rates to attract new customers.

ME Bank grants 25 percent LMI discounts to first buyers with a deposit of at least 5%, as of today, although those with larger deposits can access lower interest rates.

“This offer will help improve housing affordability and first buyers one step ahead at the perfect time, ”said Andrew Bartolo, general manager of home loans at ME.

“With COVID-19 impact on house prices and the many government grants and incentives available, now might be the perfect time for first-time home buyers to finally hit the market.

Meanwhile, Virgin Money has effectively removed its LMI fees for eligible borrowers, which include both first-time homebuyers and those looking to upgrade their homes, with a deposit of at least 15%. Mortgage borrowers typically have to pay for LMI, which can cost thousands of dollars, if they have more than 80% LVR.

Although eligible clients do not need to pay for LMI, the insurance will still be applied to their home loans.

Lenders who cut mortgage rates September 21-28

Source: RateCity.

The lowest rates of the big four banks

Lender Announced variable Announcement

2 years fixed

Announcement

3 years fixed

ABC

2.69%

2.29%

2.29%

Westpac

2.19% for 2 years, then 2.69%

2.19%

2.19%

NAB

2.69%

2.19%

2.29%

ANZ

2.72%

2.29%

2.29%

Source: RateCity.com.au. Note: Rates are for homeowners paying principal and interest. * Westpac rates apply to customers with a loan to value ratio of less than 70%. Data correct as of 09/28/2020.


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