Circumstances associated with Covid-19 have certainly created confusion as clients are hit with mixed messages with respect to interest rates, the economy, property prices, valuation and more.
Unless you have a crystal ball, you will need to make decisions based on the best information available and in consideration of your own personal financial situation. This guide provides a list of commonly asked questions by our client in recent time.
If still unclear, our Specialists can help provide a current view of the situation and the market.
Question – Is the value or my property likely to fall?
Answer – The unprecedented nature of Covid-19 makes it somewhat difficult to know with certainty. According to Shane Oliver, Chief Economist with AMP, “until a month ago economists were looking for gains of between 5 and 10 per cent in values this year. At best this will evaporate. At worst prices could fall 20 per cent”
Question – How can I reduce the repayments on my loan?
Answer – If you can refinance your loan at a lower interest rate, you will reduce the amount of interest you pay each month. Alternatively, you can consider extending the term of your loan. Most lenders are also providing options to defer interest payments depending on individual circumstances. It is however important to differentiate the difference between a true reduction in cost versus a deferral of cost. The best way of reducing your cost is to reduce the interest you are paying each month by refinancing to a lower interest rate.
Question – Are interest rates likely to fall further due to Covid-19?
Answer – The Reserve Bank Governor has indicated that at .25% we are nearing the bottom range. We have seen some lowering of rates for Fixed Interest terms which are now lower than variable rates. Sadly, there is no right or wrong answer. How each client approaches this situation very much depends on the individual’s specific circumstances. Speaking to one of Brisbane Home Loans Specialists will certainly help.
Question – Should I wait for further interest rate falls before refinancing?
Answer – You need to weigh up the risk between rate, property value, economy, your financial situation and where the property market could end up. If the value of your property prices comes down, then the equity in your property will be lower. Depending on how much you owe, this could increase the difficulty of refinancing. The current level of interest rates is lower than ever seen in Australia. This is a critical factor for consideration.
Questions – Have valuations fallen already?
Answer – Valuations are partially based on sales of comparable properties in the past 3 months which were reported positively in Brisbane between January and March particularly for some segments of the market. If property prices drop in the next 3 months, valuations will follow the trend of past 3 months sales. Commentators, economists and property specialists are generally suggesting some reduction in property prices, albeit the timeframes vary considerably. If property prices do retract, then valuations will fall accordingly. This factor needs to be considered if you are waiting to refinance.
Question – What can I expect from the Banks if I refinance?
Answer – We have experienced a noticeable difference in the time taken by banks to process applications. Booking phone settlements can take up to 2 hours. We envisage that this could probably worsen as more and more bank representatives work from home. Our advice to clients who have been considering refinancing their loans, to do it sooner rather than later as every day that passes may worsen and influence timeframes for valuations.
Question – Will it become more difficult to access lenders due to social distancing?
Answer – Most lenders are still manning their branches, however social distancing and working from home has made it more difficult for clients to obtain good personal service when applying for new loans or refinancing. Mortgage Brokers like Brisbane Home Loans have adopted social distancing recommendations and continue to offer personalised service. Where necessary, representatives will come to you to facilitate signing of application documents etc. Smaller Mortgage Brokers are likely to come out of the Covid-19 restriction quicker and are most likely to continue to provide clients a high level of service.
Question – I have a fixed interest loan with 6 to 12 months still to run. What should I do?
Answer – Our experience of late with existing clients is that often, the cost of breaking a fixed interest loan are by far outweighed by the savings. This has been even more evident for clients moving to Fixed Interest rates who adopt a long-term view. To assess your specific situation, contact your lender and ask for your breakout costs. Once available contact one of our specialists and we will quickly let you know if breaking your existing loan will be financially viable.
Question – What should I do to start refinancing my loan?
Answer – Call us as soon as possible and book in a phone appointment. It takes about 30 minutes for our specialists to get the necessary information from you. This can be done over the phone. Once the application is ready, we will do everything possible to get your application into the system quickly.
Information provided does not represent any form of advice. We highly recommend that you consult your lender, mortgage broker, financial adviser or accountant. The information provided is intended to be used as a general guide.
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