Over the past weeks we have seen lenders reduce their variable and fixed interest rates for Owner Occupiers and Investors. Some lenders are now offering tiered interest rates on the Loan to Security Ratio (LVR).
An example would be if the LVR was under 60%. This would attract a slightly lower interest rate than a loan with a LVR of 80%.
We are also noticing the major banks reducing their discounts on “packaged” loans. All discounts above and beyond the bank’s standard tiered discounts are subject to pricing approvals and to obtain a higher lending discount of interest rates the borrower would
need to be in the upper end for the lender to consider higher than normal pricing discounts.
Floor and Buffer Rate
This sensitive area for lenders has seen some of the lenders reducing their “floor rates” range between 5.00% to 5.50% with a buffer ranging from 2.50% to 2.75%.
However, whilst this may provide additional borrowing capacity for customers who have rental income or proposed rental incomes, the lenders have scaled back their allowance for rental income from 80% to 70%. Therefore, the outcome would be a reduced borrowing capacity.
In addition to this, lenders are constantly adjusting their “living costs” expenditure and are now attributing a percentage of Gross Annual income. Subsequently, the higher the gross annual income, more is allocated for “living expenses” plus fully detailed expenses for other monthly expenditure. Examples include childcare, private schooling, holidays, pet insurance, TV streaming and other discretionary expenses.
If you have any concerns or questions about how this will affect your credit rating and ability to successfully secure finance, call Paul today on 1300 FLAKUS.