Competition in the home loan market has intensified further with three major banks slashing their five-year fixed mortgage rates to less than five per cent.  One or two year fixed rates have been dropping to historically low rates but it’s the first time banks have been willing to offer cheap, long term rates.

Master Builders Financial Services Manager, Harry Pontikis, said that greater competition, lower funding costs on global bond markets and a strategy to ‘lock in’ customers from future competition may be driving the cheaper interest rates.

“Something to note is while the 4.99 per cent, five-years fixed rates are below the three banks’ variable rates, this is not a reflection of the ‘true rate’ or the actual interest rate once you include annual, monthly or other fees,” he says.

“The fees will often increase the headline rate of 4.99 per cent by another 0.5 per cent or more.”

Fixing you home loan may not suit everyone, especially if your income is not consistent and you may have the ability to pay off large chunks of your mortgage at a time or you may have a tendency to change banks every two or three years.  There may also be an ‘interest rate shock’ if interest rates go up during the fixed period and you have not amended your budget to accommodate the higher costs once the fixed rate expires.

“Competition is not only limited to consumer lending; loans to the business sectors, especially the building industry have skyrocketed,” Harry says.

“Banks are offering rock bottom rates, waived fees and have eased their lending policies to levels not seen since before the Global Financial Crisis in 2008,” he says.

“People should take this window of opportunity to restructure their personal and business loans now that it’s relatively easy, before the next round of tightening of credit occurs.”

The self-employed have access to loans which allow them to consolidate business debt into residential interest rates, borrow on low doc terms, finance developments and projects without pre sales and even at near residential interest rates. Non-bank lenders are also trying to retain and obtain market share as the banks are pushing more into their traditional domains. They have done this by dropping their interest rates and making their lending policies more lenient.

“The problem most people face is knowing at which stage of the lending cycle banks and lenders are at, at any point in time and therefore knowing the best time to borrow or restructure their affairs,” Harry says.

“The answer is very simple; consult with your advisers and ask your broker who should be qualified, knowledgeable, experienced and well connected within the industry you work in.”

Harry advises to never go directly to the bank, never use a broker who does not specialise in your industry and always have your advisers separate, not referred from each other.

For more information, contact Master Builders Financial Services on (03) 9411 4555.

Disclaimer: This information is general in nature and not to be considered as specific advice.

Chocolate Money t/a Master Builders Financial Services / Australian Credit License 387277