Finance advice
Kevin Lee

Is your bank cheating you from a rate cut?

By Kevin Lee

Interest rates are often given a lot of thought and attention by investors, and it's often hard to find out when to fix. Here's my perspective on negotiating this decision.

Blogger: Kevin Lee, founder, Smart Property Adviser

The team at Smart Property Adviser recently surveyed our clients asking two very direct questions:

1. What would you like more of from property investment?
2. What would you like less of from property investment?

The responses we received for the first question were 'almost predictable' and revolved around increasing their income.

However, the responses we received for question #2 had a common thread. Most respondents wanted less headache with interest rates, in fact this is what one respondent said: "[less of] wondering whether or not to wait til the next interest rate drop before fixing!"

Since the RBA meet again next Tuesday (August 6th) and currently there's intense speculation about another drop in interest rates, I thought it would be prudent to share a little known secret with Smart Property Investment readers. To some readers it's 'fair warning'.

Since the GFC the current interest rate gap between the RBA official cash rate and the average basic variable home loan rate across The Big Four Banks has risen to 1.46%.

Yes, all those RBA movements where the banks kept "a little bit here and a little bit there" have added up to a massive GAP!

What's worse is that although the RBA have been cutting their official rate - and WILL do so again next week - the major banks are not giving their existing customers (you) the appropriate rate cut on your existing loan/s.

Read on if you want to see the game they're playing with you ....

A few weeks ago we became aware that a major bank was charging Lyn (a client) 5.72% on her $230k variable rate loan .... BUT for a new client the same loan would be just 5.35%.

This bank was profiteering to the tune of 37 points or $851 a year on this one loan for one client - blatantly discriminating against taking advantage of an existing client to the tune of over $70 a month!

Little wonder they make around $5 billion profit each year....

We investigated and found that it's common amongst the Big Four to have a variable rate product for "new money" - translated that means you need to be either a new client, or borrow 'X' extra dollars from them to qualify.

Our finance team quickly pointed out to Lyn that the best carded variable rate is actually 4.99% - and that rate is available from either a 'second tier' bank and a non bank lender.

Here's a tip: most readers wouldn't know that there are currently 25 variable rate loans at or under 5.19% from both Big Four, second tier and non bank lenders.

Naturally some conditions, restrictions and/or fees etc apply but hey, it's not rocket science.

If you're currently paying 5.72% on your $300k loan and you could be on 5.19% - ask yourself whether the $1590 difference is better off in your bank account or theirs? So their secret is out...

When the RBA cuts official interest rates by 25 points again next week, let's hope your bank passes it on to you as well.

But in any case, chances are you can do better than what you currently have. Contact our office if you want some 'negotiating tips' to assist you to get the best rate possible out of your current lender.

 

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About the Blogger

Kevin Lee

Kevin Lee

Kevin Lee of Smart Property Adviser is regarded by many as Australia's most trusted property investment adviser. Since 1999, Kevin's been the go-to-guy for people when they need honest finance and property investment advice and guidance.

Kevin hosts a regular Investors' Boardroom and investors from around the world fly in to Sydney to attend. More information is available at www.smartpropertyadviser.com.au

Email:
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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1201 (52) {
  ["id"]=>
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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