Widening interest rate gap puts brokers under pressure
With ASIC's recent crackdown on investment loans forcing banks to hold more capital in reserve and prompting decreases in LVR, lenders have taken advantage with attractive offers to proven borrowers with good credit histories. Many banks are capping their LVRs at 80 per cent or putting a halt to lending altogether, but broker and Managing Director of Capital Home Loans, Chris Foster-Ramsay told the Australian Financial Review that, while there are great deals out there, lenders are picking borrowers with better credit histories. "Lenders are offering better rates but are also more choosy about who they want to do business with," he said. Making up for lost business, lenders are offering cash-back incentives and impressive interest rates to attract home buyers with stable incomes and untarnished repayment histories. Canstar has found the lowest interest rate at 3.97 per cent and the highest at 5.99 per cent, a gap of more than two per cent. On a one-year fixed rate, the gap has widened to 2.35 per cent, while it is at 1.8 per cent for four- and five-year fixed rates, according to Canstar analysis. There has been a rapid increase in investors wanting to switch from investor to owner-occupied products for the lower rates. Property owners applying for better rates will be assessed on their repayment records and their discipline, but St George Bank and Westpac Group claim the current increase in property owners wanting to switch status is under review to make sure rules are not broken.