Bank Changes to New and Existing Loans
As your mortgage broker, we keep up to date with market and industry related changes, with a view to ensuring our clients are given the best available information when changes occur.
This communication is to update you on an industry-related change and our proposed course of action.
What Has Happened?
In the last week, many banks have announced increased pricing on new and existing loans, predominately residential investment property loans.
Why Has This Been Done?
The banking regulator APRA (Australian Prudential Regulation Authority) is mandating that Australian banks hold extra capital in reserve to cover a greater percentage of the loans on their books. The recent announcements of loan interest rate increases to new and existing loans is a result of the new Capital Adequacy Ratios. This APRA requirement is designed to make Australian Banks more resilient to economic pressures, but there is a cost to the banks for having to hold this extra capital and this cost is typically funded by higher loan interest rates.
What Does This Mean For You?
The interest rate on your loan/s may be about to change. You will be notified by the particular bank if your loan/s are affected.
Our Course of Action
We have been monitoring interest rate change announcements and are conscious of those clients who will be affected. The changes advised to date will take effect over the course of the next month or so and we also believe there will be further announcements to follow in the coming weeks. We are therefore taking an initial ‘wait and see’ approach before making any client recommendations for existing loans.
Once the majority of the lenders have made their announcements, we should then have the best knowledge available and be confident that our recommendations can then apply for the foreseeable future. For example, we do not want to recommend a refinance from Lender A to Lender B, if Lender B will make similar changes as Lender A and any benefit of a refinance will be lost.
In the meantime, if you have any immediate or direct concerns, I would strongly encourage you to make contact with your Finance Manager who will be happy to discuss your specific circumstances with you.