Home Loans Market Set To Become Competitive Again

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A lack of liquidity in global money markets (which has driven up the cost of wholesale funding) combined with the more favourable terms offered to the major banks in relation to the Federal Government’s guarantee for their global borrowings have made it nearly impossible for the non-bank sector to compete in the home loans market for the past 12 to 18 months.

As a result the major banks have reportedly secured 98% of the mortgage market in Australia and despite initial reassurances that they were not impacted by the global crisis, they are now increasing their margins to levels higher than those that existed before the global credit crunch and borrowers find themselves back in the early 1990s mortgage environment. At that time the major banks also enjoyed almost 100% of the home loans market because there was little competition from other lending sources. This changed when the non-bank sector entered the market aggressively with bank-like product being long term 25 year principal and interest loans and most importantly priced below the major banks.

But things are about to change with the Federal Government’s announcement that it will be withdrawing its wholesale funding guarantee as at the end of March. Once the guarantee is removed all lenders will be in the same boat and competing on a level playing field for funds. Borrowers can only benefit from this scenario as home loans become more competitive again. Regrettably those borrowers who chose to refinance to a lower interest rate over the past 12 months (and pay the costs of doing so - valuation, legal and establishment fees not to mention exit costs where they applied a) may soon find themselves no better off as the disparity in interest rates disappears among home loan lenders.

In the early 1990s the bank and non-bank sectors only offered a standard vanilla type home loan product with limited features. Over the past 15 years the product range of Australian home loans has increased significantly with borrowers now able to access not only cheap home loans but also home equity loans, first home loan (specifically tailored for this sector of the market) and until recently no deposit home loans for those high income earners wanting to enter the property market but not having the genuine savings required to put down a deposit. Variable rate home loans have become multi featured and can be tailored to encompass a number of loan accounts. Rather than having three separate home loans a borrower can take out one mortgage and within it include a home loan, an investment loan and an equity home loan investment line of credit component as well.

If you are considering taking out a home loan then check out a home loans calculator online for a home loan comparison - to compare the impact of the different home loan interest rates being offered by various home loan lenders. Home loans calculator can also factor in additional repayments you might be able to make either from the outset of your mortgage or at intervals during the term of your mortgage. The home loan mortgage calculator will demonstrate the savings you can make on your mortgage simply by increasing your monthly repayment amount by a nominal sum. You can save many hundreds of dollars in interest if you make the effort to do this – if circumstances change you can always reduce the payment to the minimum required at any time.

Article Source: http://depositarticles.com/

If you are one of the many Australians with home loans now you might be wondering if you have the best deal? Shopping around for home loans can be well worth the effort as you can save money by comparing. submitted by: Marcus Brady

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