JSMedia – This week has seen several lenders slash their mortgage rates, making refinancing more attractive. With the cost of funding high, lenders are competing for your business. As a result, the 30-year fixed-rate mortgage rate is now 3.29 per cent, 0.3 percentage point lower than its previous high. At the same time, the NewBuy three-year mortgage has been reduced to 5.29 per cent, 0.50 percent lower than the standard three-year 95-per-cent LTV loan.
While mortgage rates are historically low, lenders were not keen to fight for the top of the best-buy tables. But now, they are back at the top, offering the lowest rate on a two-year deal. Those who track rates at Moneyfacts and L&C believe the launch shows rate competition is returning to the mortgage market. In addition, the launch of two new brands, CBA and NAB, has led to more competition in the market.
Since mortgage rates were historically low, lenders have been reluctant to compete for best buy tables, but this recent wave of launches has changed this. The average best-buy rate for a five-year fixed loan is now 0.9 percent, which is the lowest since September 2017. According to Moneyfacts, the rate is predicted to fall even further in the months ahead. So, if you want to buy a house this month, the competition has returned to the market, which means even more affordable mortgages for buyers.
Mortgage Refinancing: Rate Competition Spun As Lenders Slash Rates
Although lenders have started raising rates again, the mortgage industry’s profitability follows a predictable pattern. During boom times, lenders take their profits and give them back to the market. In a downturn, they give a portion of the profits to the government. That is what happened when Halifax announced an eight-per-cent home loan scheme. As the news spread, interest rates began to rise, triggering an avalanche of applications across the country.
However, the rates of new build properties have also been ruled out by some lenders. While these low rates are attractive, they should not be the only determining factor for your home purchase. It’s essential to compare the total costs and benefits of the mortgage, and make sure you don’t get caught up in the pitfalls. The lower the rates, the better for you. This is especially true in the case of refinancing.
The mortgage market is in a desperate state. Lenders are slashing rates to attract customers. This creates a lot of competition among lenders. Often, lenders are competing for the same customer base. So, you might find that the interest rates of the various loan types are different, depending on where you live. In the end, the best mortgage rate for you will depend on your situation and credit history.
In addition to the low interest rates, lenders are also slashing their standards to keep their customers happy. While they are still considering self-employed applicants, these lenders are scrutinising them more than before. Typically, they’re requesting recent bank statements and past-year accounts from prospective borrowers. Lenders are also looking for evidence that a borrower is getting government assistance. The extra checks may become too much for the lenders.
The Federal Reserve has slashed mortgage-backed securities purchases, forcing banks to increase their rates and squeeze consumers. While the Federal Reserve’s actions are encouraging, the changes are causing the mortgage market to tighten. With the cuts, many consumers are finding it more affordable to refinance. This is a good thing for the economy. If you can save hundreds of dollars over the life of your loan, then you are already ahead.
The Federal Reserve is now scaling back its stimulus activities, but it’s doing so much more than it should, and this is already beginning to have an effect. While a rise in interest rates will slow the pace of home price growth, the tightening credit standards will push up prices and keep a home affordable for most consumers. Moreover, families struggling to save for a down payment will have trouble qualifying for a mortgage with lowered credit standards.