Borrowing capacity on the improve!
The Reserve Bank of Australia (RBA) has kept the cash rate on hold this month. This was expected after the RBA cut the official cash rate by a total of 50 basis points over June and July. This has resulted in banks/lenders having all time low interest rates for both Home and Investment loans. There are particularly good opportunities to save money on your investment loans that have interest only repayments. These loans have become far more competitive in recent months and rates can now be as low as 3.56% for investment loans with interest only repayments.
Apart from record low-interest rates the other biggest change we are seeing is the opening up of lending and clients overall borrowing capacity. This is as a result of the Australian Prudential Regulation Authority (APRA) recently lowering the minimum interest rate floor for use in serviceability assessment of home and investment loans. This now means when banks/lenders assess your home or investment loan application they now use a lower assessment rate of around 5.7% as compared to a previous minimum of 7.25%. This has resulted in our client’s overall borrowing capacity increasing between 10-15%.
It has been an incredibly busy time at Wellman Finance since the May election. We have numerous clients who have loan pre-approvals waiting to purchase a new Owner-occupied property. These clients are finding stock levels low and waiting for more properties and buying opportunities in the Spring market. This, coupled with increased Investor client activity (who are now getting back into the market) is likely to see Melbourne property prices and clearance rates steadily increase in the back half of 2019.
As always if you would like to discuss your situation, please give me a call or send me an email.