Banks, Interest Rates and more…..
Thanks to Brendon, Graham and Rupert of VELOCITY FINANCIAL for the following information:
What are the banks doing? 90 is the new 80
As the months go by, banks are beginning to loosen up their credit policy for customers with less than a 20% deposit. In fact we would go so far as to say for some banks, 90% is now the new 80% (in terms of their lending percentage -or LVR). An example of this is that we can now organise to get your buyers a 2 month pre-approval if they have a 10% deposit. Up until recently this wasn’t possible.
In saying that, we would add that not all banks have the same appetite in this space and so (with the risk of appearing to be self interested) approaching the right bank with the deal presented in the right way has never been so important to get this sorted out. Clients do only have one shot at their approach to a bank… using a broker will ensure this approach is most likely to succeed.
Reserve Banks treatment of property investors
You may have been aware that the Reserve Bank had introduced new regulations for banks when lending money to property investors with 5 or more properties. It was announced last week that this has been postponed from the 1st July until December this year. So at worst there is a five month reprieve here for property investors. One would have to wonder if this policy is proving very difficult to implement and will ever see the light of day. We know the banks are lobbying hard against it.
You will be aware that last month the Reserve Bank increased the Official Cash Rate to 3.25%, the third increase this year. Floating rates went up to around 6.5%. The current expectation is that floating rates will be 7% at the end of this year and 8% by the end of 2015. That saying, right now there is some real competition between the banks for business and right now they are throwing cash at potential new customers and providing some very good 2 and 3 year rates. If you or your clients are considering locking a mortgage rate for 2 or 3 years, our advice would be that you do this very soon as it is the general market prediction that these 2 and 3 year rates may lift in the near future.
Brendon, Graham and Rupert
The adviser’s at Velocity Financial are Registered or Authorized Financial Advisers. No investment decision should be taken based on the information in this piece alone. A Disclosure Statement is available free of charge upon request. For more information visit www.velocityfinancial.co.nz