Trying to find out what the best home loan deal is at the moment. Details are: <80% LVR, around 400k with offset, low fees, investment loan. Any suggestions? Thanks in advance.
Best Home Loan Deal - Nov 2016
brainactive on 12/11/2016 - 19:07
Last edited 12/11/2016 - 19:14
Last edited 12/11/2016 - 19:14
Comments
Thanks will look into it. What specically about the support appeals to you?
For me, when choosing a broker you want someone who answers queries quickly and efficiently. Also someone who knows all the ins and outs of every deal and their applicable laws/restrictions. Above all, you want them to get the best deal including any cash back for you. From what I've read their online presence seems to suggest that. But as I said, I don't have any dealings with them so it's just an observation and my opinion of course.
Home loans are long term so you need to think about the long term factors that could affect your loan. For example, while rates are low now, over the medium to long term they will rise, and some of the non-bank lenders might not be able to keep their rates as low relatively. And if worse comes to worse and we face another credit crunch, their funding might come under pressure and they might have to jack rates up far more than the banks.
So rather than just blindly go with the lowest rate little known non-bank lender, consider the "no-frills" lending arm of the banks such as ubank from NAB, which have pretty competitive rates (3.64% at the moment).
Also, the comment above about brokers having better bargaining power, remember that brokers will only recommend loans where they are paid some form of commission, so their consideration set will be a subset of all the possible loans.
I thought under their license they are obliged to show you ALL offers? Well, that's what happened with my house. I'm sure a broker here could clear that up.
Hi ihbh & dazzy, actually depending on the circumstances you may both be right. Brokers are legally required to provide all people enquiring about a loan a Credit Guide upfront. In short, in that Credit Guide the broker is obligated to reveal the scope of their licensing and the lenders that they deal with (so you should know upfront which lenders they are comparing). A good broker should have at least 40 lenders on their panel, at Naritas we have over 100. Authorised credit representatives are limited to only discuss lenders on their lender panel, full credit licence holders can discuss any lender but they will only get paid a commission for those on their lender panel. As such, for full ACL holders with broad lender panels it is possible that they may be able to compare offers for all the lenders you wish to deal with (which is commonly seen when a borrower says they wish to deal with only major banks and a handful of other lenders they like). It is rare, however, for a broker to have every single lender on the market on their panel, that is especially the case with micro non bank lenders.
With respect to no frills lenders, you'll find that many of the most well known brands are actually just rebranded wholesale mortgages. Some brokers (predominately those who hold full credit licences) have access to these same wholesale mortgage providers. Take the example of uBank that ihbh listed. uBank is effectively a single product broker (authorised credit rep) of Advantedge (AFSH Nominees mortgages). You will see in their Credit Guide that they make about 0.20% upfront and about 0.22%p.a. trail for introducing those loans. Personally, we can vouch for the fact that Advantedge has been extremely popular with our clients who were looking for no frills loans. That said, if price was a main criteria for selection, Advantedge (like most lenders) is not the cheapest every day. Each lender adjusts their pricing on a periodic basis to manage demand - and you'd be surprised to see how frequently full service lenders have periodic promotions that are surprisingly cheap. So one shouldn't assume no frills brands are automatically the cheapest.
To answer the OP's question about a good $400K loan with offset, Bank Of Sydney was recently 3.54%p.a. (3.55%p.a.) with 100% offset and no annual fee (as well Android and Apple Pay). They increased that rate to 3.64%p.a. (3.65%p.a.) because they were absolutely swamped with demand. If you apply by November 18 you can still get that rate along with a $1500 settlement rebate at Naritas. If you apply after the 18th of November, Bank of Sydney are raising the rate for that package to 3.79%p.a.(so you can see what we are talking about with respect to intermittent promotions).
Lastly, ihbh raises a really good point regarding sticking with a bank. We deal with a whole range of bank and non-bank lenders, and we still see the majority of borrowers opting for banks. Why? You get the Commonwealth Guarantee on Deposit Funds (which is a major plus for offset account holders) and you have the peace of mind that the organisation is audited by APRA by virtue of them holding a banking licence and being an ADI. It's not an unreasonable argument to suggest that these standards breed for more stable and reliable service provision.
Hope this helps :)
Thanks, this was helpful. Two follow up questions to this:
1) You mentioned that the fact that banks get audited by APRA perhaps suggests that they are more stable and have more reliable service provision. Can you elaborate on what you consider to be reliable service?
2) You mentioned that Bank of Sydney loan can be had for 3.64% p.a. if applied before 18th November. Presumably that is a variable rate loan so wouldn't it revert back to the new rate 3.79% p.a. anyway (i.e. I would only get the lower rate for 5 days?)
@brainactive: Honestly, you should PM naritas & get them to square your loan away for you. Problem solved. :)
You're most welcome :)
Answers to your questions below:
1) You mentioned that the fact that banks get audited by APRA perhaps suggests that they are more stable and have more reliable service provision. Can you elaborate on what you consider to be reliable service?
Let us preface our response by saying that there is absolutely nothing wrong with competition in financial services and we don't want people to think that non-banks are automatically dodgy - they are just a different beast with their own pros and cons. So to answer your question, the main issues to do with reliable service provision emanate directly from APRA's charter:
1. Banks have to meet stringent guidelines including capital adequacy requirements and have to comply with the Banking Act which governs their conduct all the way down to measures such as disqualifying people from employment in banking. This kind of financial strength (as ihbh implied) should hopefully be conducive to delivering a relatively consistent SVR and not cutting corners with respect to the way the organisation is run. Which brings us to..
2. Compliance with the BASEL reforms (designed to ensure banks can pass stress tests amongst other important goals) & the Australian Bankers Association Code of Banking Practice.
3. The safety net of the Financial Claims Scheme which provides a guarantee of up to $250,000 for monies held in ADI deposit accounts (such as 100% offset accounts).2) You mentioned that Bank of Sydney loan can be had for 3.64% p.a. if applied before 18th November. Presumably that is a variable rate loan so wouldn't it revert back to the new rate 3.79% p.a. anyway (i.e. I would only get the lower rate for 5 days?)
Apologies for not being clearer with our reference. Applicants who applied at 3.64% (and also at 3.54%) would be entitled to a fixed discount off the SVR for the life of their loan. NB: the delivery rate of most well priced variable loans are actually a product of a discount (fixed or temporary) applied to the standard variable rate (SVR). In the case of Bank of Sydney the SVR is 5.64%p.a. so the present discount is 200BPS - this will drop to 185BPS on November 19.
Hope this helps.
PS If you had some questions regarding your circumstances (that you don't wish to share in the public forum) please feel free to send us a PM.
Would having home loan with the big banks be more advantageous when it comes to valuation e.g. When try to refinance to access equity compare to smaller institutions and/or no frills products?
For example, I heard that wespac is particularly favourable for investors because their valuations tend to be higher than others?
Not sure how true that is..
@OzFrugie:
Great question.Would having home loan with the big banks be more advantageous when it comes to valuation e.g. When try to refinance to access equity compare to smaller institutions and/or no frills products?
For example, I heard that wespac is particularly favourable for investors because their valuations tend to be higher than others?Generally speaking, the big banks do have more lenient policy with respect to cash out/equity releases than some of the cheapest niche lenders. That said, there are small banks and non-banks that have lenient cash out policies at similar or lower prices to the major banks.
However, determining the value of a property for the purposes of refinance is fairly consistent across most lenders. In theory, if the financial system is working, the valuer is completely independent of the bank. That is, the valuation company is meant to be a check or balance in the system. They are not bank employees, they are 3rd parties who are considered certified experts. Many of the biggest financial institutions have the same valuers on panel which include companies like HTW, Opteon & CBRE. Occasionally we see correlations between conservative valuation estimates and smaller lenders with extremely well priced loans, however, these kinds of vals usually correlate with more risky propositions vis a vis a blue chip property with plenty of comparable sales is not usually the victim of a conservative val with a small bank - it is typically the more marginal property where there is weak data to support a higher figure.
That said, some of the bigger lenders (like Westpac) may accept the contract of sale in place of a full certified valuation for purchases. That kind of policy is not prevalent with smaller banks.
Hope this helps.
@naritas: Banks have to meet capital adequacy and BASEL standards, both of which result in higher compliance costs. Add to this the fact that they have a physical (rather than online only) presence gives them a very compelling case to charge us higher rates. Wouldn't non-banks be much leaner operationally? There may be some cutting corners but it could also be just efficiency.
If nothing major happens over the next 6-7 years, then non-banks are likely to have lower rates.
If something major happens over the next 6-7 years and the non-bank is nearing collapse, then non-banks will likely raise their rates (possibly to higher than bank rates). Is this the worst that can happen?
Banks have to meet capital adequacy and BASEL standards, both of which result in higher compliance costs.
True, however, all lenders have to raise capital to make loans. Ultimately that same compliance often breeds for cheaper costs in raising capital so there is a balancing act between the two competing forces. Furthermore unlike non-banks, banks make loans from deposits - which, given the low return on deposits to depositors gives them a way to provide comparatively cheap loans.
Add to this the fact that they have a physical (rather than online only) presence gives them a very compelling case to charge us higher rates.
Banks are shutting down their physical branches and moving to the use of brokers (ING - a bank - does 90% of its mortgage lending via brokers) and other technological innovations to deliver low cost lending. This is not an area where non-banks necessarily have an edge - especially in comparison to small banks.
Wouldn't non-banks be much leaner operationally? There may be some cutting corners but it could also be just efficiency.
Perhaps, but in our experience, this is not necessarily so, especially in comparison to small banks.
If nothing major happens over the next 6-7 years, then non-banks are likely to have lower rates.
Perhaps, but non-banks are complaining that they are finding it hard to raise funds as cheaply as the banks are due to the Commonwealth Guarantee on Deposit Funds. If anything, there is concern in the industry that non-banks are finding it hard to compete with banks at present and the issue is a hot topic so far as microeconomic reform is concerned.
If something major happens over the next 6-7 years and the non-bank is nearing collapse, then non-banks will likely raise their rates (possibly to higher than bank rates). Is this the worst that can happen?
No. The worst that can happen is that you could lose the funds that you have sitting in your 100% offset account. In second place would be the fact that if the collapse occurred in the middle of a transaction the borrower may default or face penalties on the property purchase or construction project. For borrowers not in the middle of a transaction, they may be forced (likely through dramatically increased costs or revised credit terms) to refinance - which may or may not be possible or highly inopportune.
To reiterate, non-banks are not bad and the team at Naritas love to do business with non-banks. In fact, we see non-banks as vital to putting competitive pressure on banks of all sizes. For us, in particular, non-banks have been very popular with our investment clients due to non-banks not facing the same scrutiny and hurdles that banks are facing from APRA. As such, non-banks will often do deals that banks deem too risky or outside of policy for banks. Furthermore, not all non-banks are equal, and each present their own unique set of pros and cons that differentiate them from banks (i.e. non banks range from micro lenders operating on a shoestring budget to the size of major public companies). As such, whether those pros and cons sway you in one way or another ultimately depends on how you weight such pros and cons.
[@naritas](/comment/4109 4109 1/redir):
Thanks for the answer naritas.
In my experience with one of the big banks, when they valued my property for equity release, they didnt send valuer to inspect. I think they just used their own data or estimate.
Whats the most popular products from smaller banks or non banks with similar features offered by big banks? Mostly interested in offset and not going to be forced to pay the loan down from offset if goes bust (ADI compliant)
Expecting to pay back loan in 6-7 years so probably won't be that that long term. Loans.com.au are at 3.51% comparison rate and seem to have consistently maintained fairly low rates compared to market in the past. Any idea if this is any good? Are they trustworthy? How do I assess their likelihood to Jack up rates in future?
i have heard too many horror stories about them.
Can you please share a few
I'm with them. They were cheapest at the time I was looking. Two caveats:
1) They're internet banking site is sufficient but I've seen better. e.g. no fancy mobile apps
2) Over time, your rate as an existing customer might diverge from what they're offering new customers. E.g. they're currently offering 3.49% with an offset account, but I'm on 3.75%.2) Over time, your rate as an existing customer might diverge from what they're offering new customers. E.g. they're currently offering 3.49% with an offset account, but I'm on 3.75%.
It is the case with many banks though. Someone gave example of Bank Of Sydney just above. Is there any other risk element with them?
I dealt with one broker based out in qld. pretty happy with him and very quick to response to all my questions, even while he was in Bali on holidays. PM me if you wanted info. I am based in VIC but from loan perspective, that does not matter tho.
I dealt with one broker based in qld. bloody useless.
I dealt with a few brokers in NSW and Victoria. Useless to say the least. Then I also went to other states to get the similar feelings.
Does above statement of mine make any sense to you? My friend, let's not post something which doesn't make sense!
Is it fair to say that finding the best home loan shouldn't be too different to finding the best online savings account? Just find the lowest rate subject to the provider being reasonably reputatable (i.e. not likely to vary their rate by too much in the future and meeting regulatory guidelines). For online savings accounts, it's very obvious that any of the big 4 accounts are rubbish (in terms of their measly rates) and the only real competitiors are Rabodirect, UBank and ING. For home loans (<80% LVR, offset), is there a similar clear cut solution to narrow down the options?
Any recommendations on websites where I can access free data on the historical movements of home loan rates by provider, over time to analyse some trends?
Definitely go to a broker as they have better bargaining power. With under <80% LVR I would assume you should be able to get one of the better details out there.
If you're after something online, I've read some good things from https://www.ozbargain.com.au/user/159116 Naritas. I can't vouch for the deals but the support looks good.