In a booming home buying market, many lenders are offering home buyers discounts and even lower rates on fixed rate home loans as market competition rises.
Despite this, demand for variable rate home loans has increased and fixed rate home loans have fallen by almost 20 percent. This say mortgage experts is due to the fact that variable rate confidence is high and home loan holders don’t feel an urgent need to fix their home loan.
With home loan lending on the rise, competition between lenders is expected to intensify.
Some lenders are accusing their competitors of using “lax lending standards” by offering discounts and incentives that entice interest in their home loan products, when these offers have not been advertised. These incentives are enticing both existing home loan holders and those who are looking to break into the market.
Online lenders, building societies and lenders with lower overheads are said to be offering borrowers “switch, ditch and smile packages” that give them fixed rate home loans under 5 percent.
The ME Bank offers a 3-year fixed rate term for less than 5 percent. The chief executive officer for ME Bank, Jamie McPhee said that fixed rate home loan volumes had doubled and presently accounted for almost 50 percent of their new home loan applications.
The National Australia Bank (NAB) recently reduced its 4-year fixed home loan rate to 5.44 percent, the lowest it’s been in 20-years. The banks standard variable rate is now 5.88 percent. This rate has been matched by the ANZ.
The big four banks – Commonwealth, ANZ, NAB and Westpac – are now backing their discounted home loans with other incentives, such as discounted building and contents insurance and home loan protection insurance.
For the existing home loan holder or those looking to secure a home loan, competition in the home loan market means better deals, but in-depth research is ‘a must’.
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