Anyone planning to apply for a home loan should review their spending habits and get "financially fit"
Despite the RBA’s decision to hold the nation’s official cash rate at 1.50%, major lenders continue to raise the interest rates on a range of home loans.
In a statement, Mortgage Choice CEO Susan Mitchell, said the decision didn’t surprise her “as a combination of factors provide little incentive for the RBA board to change the current accommodative stance on monetary policy, which has resulted in the absence of a rate change since August 2016.”
Other than a headline inflation rate of 2.1% and unemployment, Mitchell attributes the static cash rate to the continuously falling dwelling values. National dwelling values fell for the 11th consecutive month, with values in Sydney and Melbourne experiencing declines of 0.3% and 0.6% respectively in August, according to CorLogic’s Home value Index.
“There are plenty of factors keeping interest rates on hold, but top of mind is the fact that mortgage rates are already edging higher as lenders look to balance their profit margins against higher funding costs and a smaller deposit base,” CoreLogic head of research Tim Lawless said.
Put your best foot forward
According to Mitchell, Westpac’s decision to raise rates on variable home loan products by up to 14 basis points to compensate wholesale funding costs, means other lenders are “likely to follow suit”. However, from a historical perspective, Lawless thinks that although mortgage rates are beginning to climb, it will continue to support housing demand.
Data from Mortgage Choice has also revealed home loan applications are taking longer to process because lenders “are conducting a more thorough analysis of home loan applicants’ monthly living expenses” to find out if the applicant can service a loan.
‘’For this reason, I would encourage anyone who plans to apply for a home loan in the near future to review their spending habits and make a personal commitment to get financially fit by educating themselves now on what lenders are looking for,” Mitchell said.
She encouraged anyone looking to buy a property to seek professional advice from “a qualified financial adviser and mortgage broker who can work together to help them put their best foot forward before submitting a loan application.”
