Tuesday, February 17 2015
1. Lenders want you to fix your loan
Lenders offer fixed rates for one reason only – to stop you from leaving. They are purely a retention strategy. To break a fixed loan can be incredibly expensive and lenders know that in 99% cases this break cost will stop you from leaving.
Most fixed rate loans also stop you paying off the loan too quickly. So even if you secure a good rate you can only pay a minimal amount extra which could in fact see you paying more interest than if you had simply stayed on a variable rate.
Lenders pay big money to interest rate strategists to work out where rates are heading and where the cycles are. Fixed rates are designed to make you pay a higher cost of funds than if you actually stayed on variable.
Your chances of winning the bet are very low. If you don’t believe me have a look the Big 4’s combined net profit.
2. It’s not all about the rate
The biggest growth in lender income is via fees.
3. Lenders look after new customers better than their loyal clients
Which is why it is always worth reviewing your lending on a regular basis.
4. Pre-approvals are worthless
And don’t even get me started on online loan calculators.
What your income is and what a lender is prepared to use to assess your capacity are two different things.
I think the approach most lenders take is when someone makes an initial enquiry they just say “yes”. That way there is a strong likelihood that person will come back to them for their loan if they sign a contract. If the loan is declined or then approved on ales favourable terms than what they first advised it’s no skin off their nose as you are just another number and they move on to the next deal.
5. Lenders want you to cross-securitise
Unfortunately most people are apathetic and continue to pay thousands of dollars each year more than they need to.
6. Valuers dictate the market
Many lenders acknowledge privately that valuers can underscore properties and be inconsistent in their valuation methods but no one seems to be prepared to do anything about it.
7. They know most people are apathetic
At MTA Finance we provide clients with a realistic appraisal of their options based on their specific circumstances, and ensure that the structure that is put in place is designed to benefit them and not the banks.
Contact us for an initial chat to discuss your home loan requirements