From The CEO’s Desk December 2020
Welcome to another update from the Nieuvision/Loan Guides team.
In the mortgage industry there is continual evolution.
For the borrower you always have to keep an eye on the action!
The RBA last month lowered rates to a historic low .1%.
Interest rate decreases are a lever for the Reserve Bank to stimulate the economy.
They make their decisions based on inflationary measures in the economy, consumer confidence and more.
About Inflation
A key indicator for inflation is the increase in the price of goods and services we buy in addition to wages increasing.
Our current economy hasn’t really shown any of these indicators and may not for quite some time.
Leveraging Debt Sensibly
So in summary the decreasing of rates provides us an opportunity to leverage debt (sensibly) whilst it’s so cheap to access money.
The loan commitments for the month of September was $17.26 Billion with existing dwellings still attracting the largest volume of interest with $11.91 billion.
For vendors this is an amazing time to sell with such high demand at opens with people looking to buy.
For purchasers you may want to assess your strategy for buying or consider the possibility of having to increase your price point or the suburb you are willing to live.
How Can You Adjust Your Strategy?
One pivot is to reconsider your LMI (Lenders Mortgage Insurance) approach.
Many people only want to borrow 80% so that they can avoid LMI.
However I choose to look at LMI differently.
LMI is a cost to access money.
I’ve paid LMI on a purchase before for the mere reason I wanted access to $50,000 to do other investments, rather than committing more of my funds to one investment opportunity.
You Have Options
Recently we assisted a client purchasing a new home.
They were borrowing money from family to assist with the purchase making their deposit non genuine.
They were trying to stay at 95% to decrease the LMI.
However, at 95% it was leaving them short of funds for the purchase.
Our strategy ended up being based around a 98% lend with LMI being added to the loan, enabling these clients to get into their new home.
Another option is to consider an 85% lend where there in no LMI.
Yes our funding arm can take us to 85% without being charged insurance.
That’s finding our clients another $20,000 for a loan without being charged additional fees.
Above is two simple scenario’s in how we can assist but the message is, you have options.
Rick Nieuwenhoven
CEO Nieuvision Australia
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