If you think it’s only home buyers that need to worry about their maximum borrowing capacity, think again!
You see, there are many homeowners that are currently coming off very low home loan rates which the media have dubbed the “mortgage cliff”. And there is a good reason why…
The challenge for these borrowers coming off fixed rates that choose refinancing options (to try and get the lowest interest rate/best deal for them) is facing some sobering assessment statistics!
Current rates of 6%+ is the current variable interest rates refinancers are facing and with a Lenders assessment rate of 9%+ (which is using the APRA guidelines of 3% buffer) this is quite the jump from what previous rates were!
It’s a different story!
When you think that at 2% interest rates, the APRA guidelines of a 3% buffer meant assessment rates of 5%+, your maximised borrowing capacity would be higher than an assessment rate of 9%+ wouldn’t they?!
Lenders are also recognising this ‘checkmate’ situation and are reluctantly offering reduced interest rates to make loan repayments a little bit more manageable for homeowners coming off low fixed rates – to higher variable rates.
So, it is going to be very difficult to refinance and many of these borrowers are going to become mortgage prisoners, unable to escape their current default variable mortgage rate, until we see interest rates start to reduce.
What should you do?
If you can’t refinance then look at ways to reduce your interest costs – make weekly repayments, use mortgage offset accounts to deposit your pays and any other income you receive, and/or look at fixing in for 1-2 years to manage against potentially higher interest rates.
If you are seeking to refinance or negotiate a better deal on your mortgage, talk to us as we can try and get you the best possible deal from one of the 60+ lenders we deal with. Call Tony Haworth and our team on: 1300 141 453
