Competition in the Fixed Rate market is heating up – with one second-tier bank offering an eye-catching 3.39% pa. 2 Year Fixed rate – the lowest headline rate I have seen offered from a Full Service bank (ie, not an online only lender) without a laundry list of restrictions and qualifications. The comparison rate on this product is 3.94% – which reflects the higher base rate underlying the Fixed Product which will be payable after the Fixed Rate period for the remaining life of the loan.
Unfortunately for some borrowers looking to take advantage of this offer – the headline rate has caused a rush of interest which has resulted in a blowout of turnaround times, in some cases the wait time to get a deal reviewed by the bank is over 4 weeks. For anyone with a purchase contract in Queensland – this all but rules out this new offer as being realistic to fit into a standard purchase contract timeframe, even if the finance clause & settlement date are extended.
The move has been followed by reductions in Fixed Rates by many other lenders in the weeks following the announcement – competition in the market is heating up as major banks, second-tier lenders and non-bank lenders are doing everything they can to meet the market, and provide their own offers to drive new business. Competition in the marketplace leads to positive customer outcomes – and lower rates. If you haven’t reviewed your own rate in a while – you’re probably paying too much.
It’s important for all borrowers to consider – is a Fixed Rate right for me? Even if the initial rate is lower, account keeping fees, additional repayment restrictions, or lack of access to full redraw and Offset accounts may mean that many borrowers will be better off with a variable rate product (even if this means paying a slightly higher interest rate), or a combination loan (taking part-fixed, part-variable or the “best of both worlds”). The options and opportunities are almost endless, and that is what makes it exciting to be a home owner or home seeker at this time.
There may be doom and gloom in the newspapers – but as usual the big publishers and news programs are chasing eyeballs and not always telling the full story. Daily election updates and speculation often distract us from the fact that reasonable, educated purchasing decisions and prudent financial management stand to be as successful as ever, even in the current market. When competition in the market heats up, and the market is moving at different speeds – it is as important as ever to seek out expert, independent advice from an experienced financial advisor, whatever your goals in the short- and long-term.
Contributor: Alex Jacques – Director, Jacques Financial Group
