Weekly wrap - Friday 21st August
Could interest rates get any lower?
Every time we say rates couldn't get any cheaper, they do. So, we’re going to continue to say that! Probably one of the most outstanding rates that we're seeing is the new three year fixed for owner-occupied which believe it or not is 1.99%! The fixed for investors is 2.24% which is actually quite a bit below what most of the banks are now offering for owner-occupied. Let us insist on the importance of reviewing what you've got and making sure you are getting the very best deal.
‘The Resilience Project’, by Hugh Van Cuylenberg
Loan Market organized a national session with the author, who went to India as a teacher and worked with children over there.He noticed the difference in their outlook in life and their positivity, and compared that to maybe how we in the Western world as kids face so much pressure and even suffer from depression and mental illnesses. So, he came back from that with a real vision to want to empower and bring front of mind how lucky we are here. He talks a lot about gratitude and how we can live a more happy, fulfilling life. So, we've taken that on as a team, we all have a copy, and now we have a little book club to read. With everything going on at the moment it's easy to look at content or focus on things that are probably negative, but this book gets us in a good mindset. It also proves to be a very practical tool to apply to everyone's life at the moment. We encourage you, if you haven't read it yet, to jump on it.
Broker’s added value compared to loan websites
To put some context around the numbers with some clients we are working on: for a $550,000 purchase, 10% deposit, $500,000 loan. Where they currently live and in similar areas, to rent the type of property that they want to purchase is around $600 a week. They've been saving quite aggressively since we’ve been working with them for about six to eight months now, $400 a week each.
We've now been successful in getting their loan together. And this is where our value beyond just rates starts to come into play. Three or four years ago, interest rates were 4.2% to 4.6%; currently they’re 1.99%. It is literally $158 a week cheaper for those clients to own that property today than it would have been if they had bought it three to four years ago!
When you run those numbers and take the additional repayments that they can make, which was their savings previously, they're looking at paying this off within seven to eight years.
We’ve been asked what the difference is between us as a broker and RateCity? Well, we couldn't actually be more different. Because the reality is you go online at loans.com or RateCity and you get the rate. That's awesome. But that's where the service finishes.
Whereas for us, before we even start looking at banks or interest rates and particularly in that type of scenario, we’re wonderingwhat the strategy is. We've got all this extra cash that we know we can afford to put into the loan but what are we going to do with it? What is the end goal?
The difference in having someone that will develop a game plan with you and work you through that strategy through the life of that loan and the life of your goals, that's where the value is. And of course, all of the great rates that come with it as well.
And the other side to that is when you put context around these numbers as an investor. We were always working numbers or returns based upon a 4% interest rate. We currently are at 2.24% for an investor. The positive cash flow position that these clients can put themselves in with those properties, restructure, refinance, or new purchases, whatever it is, is a massive variance. We're in a unique cycle right now, where taking advantage of these rates, if you're able to do so, means the ability to reduce debt.
We know that from the investor side of things, rates are coming down but yet rents are still holding. Landlords are getting such great returns right now.
And likewise we are in the cycle where it is considerably cheaper to get out of the rental market and get into property.