Our latest Winter Newsletter with articles on:
- Buying Properties with other people
- Flexibility through refinancing
- Mortgages and Breakups
- Budget breakdown 2018
Click here or on the below masthead to read the above articles
It's been estimated that up to 1.5 million people on interest-only mortgages are due to expire in the next four years. These will revert to Principal and Interest repayments and repayments could increase by 30-40%.
These were the figures quoted by the RBA in the article below.
With over 30 lenders on our panel there are many, many lender options available to renegotiate to. Don't just put up with increasing repayments and/or interest rates. Give me a call and take back control of your Home Loan.
From 'The Age' 13th April 2018 By Peter Martin
As many as 1.5 million mortgage holders are set to face sharply higher payments over the next four years as interest-only loans convert to principal and interest loans, the Reserve Bank has warned.
Bank officials revealed the figure on Friday, labelling the switchover an “area of potential concern”.RBA Governor Phillip Lowe said this week that the next move in interest rates would likely be an increase.
The prudential Regulation Authority has told the banks to wind back the number of interest-only loans, which are mainly used by property investors.
Most are switching to principal and interest loans when the interest-only period expires, where they face increases in payments of 30 to 40 per cent.
The bank’s semi-annual Financial Stability Review, released on Friday, says loans worth $120 billion are set to switch over each year between now and 2021, accounting for a total of 30 per cent of mortgage debt.
It says most borrowers should be able to afford the step-up in payments. Many have accumulated substantial prepayments, and the serviceability assessments used to write the loans incorporate a range of buffers, including those that factor in potential future interest rate increases and those that directly account for a step-up in payments.
But it says until late 2014 some banks were conducting less conservative assessments. After discussions with the Securities and Investments Commission eight lenders have “agreed to provide remediation to borrowers that face financial stress as a direct result of past poor practices”. So far only a small number of such borrowers have been identified. Many of those who can afford to have already voluntarily switched to principal and interest loans to avoid the higher interest-only rates.
“The share of borrowers who cannot afford higher principal and interest repayments and are not eligible to alleviate their situation by refinancing is thought to be small,” the bank says. “Most would be expected to have positive equity given substantial housing price growth in many parts of the country over recent years and hence would at least have the option to sell the property.”
The most vulnerable borrowers are likely to be owner-occupiers who took out interest-only loans and still have high loan to valuation ratios.
The warning comes two days after Reserve Bank Governor Philip Lowe told an audience in Perth that the next move in official interest rates would most likely be up, that it would be the first in more than seven years, and that it would “come as a shock to some people”.
Message from CAtherine
Occasionally I come across an interesting article to do with Home Loans. I thought I'd share some of these with you here.