By Brendan Turnbull
Variable interest rates are heading north after the Reserve Bank’s decision to increase the cash rate at today’s monthly meeting.
That’s no surprise on a few counts.
The fixed-rate market has been increasing since December as lenders looked ahead into an uncertain future.
We know that the cost of living has surged in recent times. You don’t need to deep dive into the complexities of how inflation is calculated to know and feel that things are becoming more expensive.
But what does today’s decision mean for borrowers who have become used to low rates?
It’s always important to come back to your personal financial strategy.
There’s no point rushing into a fixed-rate loan without understanding more about the conditions.
For instance, some fixed-rate loans cap the number of extra payments that can be made and those extra repayments may help to put you in a better position in the long run.
And there’s no point thinking that all lenders approach assessment of loans in the same way so strategy selecting the appropriate lender should always come before the loan product.
This is especially true when it comes to lending policies specific to professions.
For instance, some medical professionals may be able to borrow up to 95 per cent of the value of a property.
That’s because astute lenders realise that these clients have professional qualifications and earning potential that allows them to feel comfortable lending to a higher amount than they would otherwise.
We recently helped a medical professional who sought a loan for a property with a purchase price where there was a 10 per cent variance between the purchase price and the lender’s valuation.
By working with a lender who was prepared to lend up to 95 per cent of the valuation amount (while still avoiding lender’s mortgage insurance), we were able to have the deal settled by pivoting in time to meet the key dates within the contract.
The challenge for people in these professions where unique lending policies are available is that lenders don’t always advertise these different approaches.
That’s where a good mortgage broker can assist – they know the banks very well and they understand the avenues open to high net-worth individuals including medical professionals and professional athletes.
We’re moving into interesting times in the financial world as regulators and politicians try to understand an economy that has fluctuated significantly through the Covid pandemic and beyond.
Information specific to your unique situation (not someone else’s) then becomes even more important in making financial decisions.
Knowing your strategy, knowing the options open to your profession and executing those plans will be crucial in the coming months and beyond.