Money is cheap, but is it easy to get?
In what is close to the perfect storm for our business, money is the cheapest it has ever been, but it has also never been harder to access.
The services of a quality Mortgage Adviser have never been so sought after. Our state of the art technology has enabled us to trade right through the COVID period and while our banking partners have been hard to access even in level 2, we have seen volumes return right back to pre COVID levels.
Banks are currently in a very conservative mindset, steeling themselves for the potential wave of losses that could occur in the future as a result of initiatives such as wage subsidies and mortgage payment deferments.
In conjunction with conservative LVRs, the banks are also assessing client’s ability to meet their loan repayments at comparatively high debt servicing test rates. What is a debt servicing test rate you may ask? This is the interest rate banks assess a client’s loan repayment affordability against.
While we are seeing record low interest rates anywhere from 2.65% out to 2.99%, banks are still assessing client’s payment ability on interest rates anywhere from 6.65% out to the low 7.00% mark. This makes a big difference as to how much money a client can borrow.
It is hard to argue that this makes much sense when interest rates are available to be fixed for up to five years at 2.99%, but it is a great example of how conservative the banks are in this current environment.
It is also worth remembering that we deal with a range of “non bank”, mortgage lenders that don’t hold a banking license but process millions of dollars in mortgages every month. Some of these are at very competitive interest rates that are less than 0.5% above those of the banks rates, but they use debt servicing test rates as low as 5.75%, so again this makes a massive difference to the amount clients can borrow.
When money is difficult to access, Mortgage Advisers are absolutely relevant and with access to New Zealand’s widest range of banks and lenders now is the time to reach out to us with any of your clients that need assistance.