New stats show big jump in use of offset accounts

New stats show big jump in use of offset accounts

Australians are taking increasing advantage of offset accounts when signing up for mortgages, new data has revealed.

The number of mortgages with offset facilities reached 2.1 million at the end of March 2017 – a 9.3 per cent jump on the March 2016 result.

There was also an increase in the share of loans with offset facilities, from 35.0 per cent to 37.0 per cent.

 

These statistics, which were provided by APRA, the banking regulator, cover authorised deposit-taking institutions (ADIs) with at least $1 billion of mortgages on their books. This captures 98.7 per cent of the mortgages held by ADIs.

March quarter Quarterly change Annual change
Total number of residential term loans to households 5.8 million 0.6% 3.6%
Loans with offset facilities 2.1 million 0.9% 9.3%
Loans with redraw facilities 4.1 million 0.5% 4.5%
Interest-only mortgages 1.7 million -0.4% 2.6%
Reverse mortgages 28,000 0% 0%
Low-documentation loans 116,000 -3.3% -13.4%

Mortgage exposures hit $1.5 trillion

The ADIs had $1.5 trillion in outstanding mortgages at the end of March – up 7.7 per cent on the year before.

That was driven by an 8.8 per cent increase in owner-occupied loans and a 5.8 per cent increase in investment loans.

Interest-only loans climbed 6.9 per cent, while reverse mortgages climbed 2.0 per cent.

March quarter Quarterly change Annual change
Total value of residential term loans to households $1.5 trillion 1.4% 7.7%
Owner-occupied $971.1 billion 1.5% 8.8%
Investment $523.7 billion 1.2% 5.8%
Loans with offset facilities $669.1 billion 1.9% 12.2%
Interest-only mortgages $583.3 billion 1.4% 6.9%
Reverse mortgages $2.8 billion 0.8% 2.0%
Low-documentation loans $22.4 billion -3.1% -13.1%
Other non-standard loans $930 million -2.9% -13.3%

Investors increase their share

There were $89.3 billion worth of new mortgages issued during the first three months of 2017 – up 9.5 per cent on the first three months of 2016.

Investment loans represented 35.0 per cent of that volume, compared to 31.5 per cent the year before. The owner-occupied share was 65.0 per cent, down from 68.5 per cent.

Mortgage brokers increased their share of the mortgage market from 46.5 per cent to 48.4 per cent.

In a sign that lenders have been tightening their lending standards over the past year, there was a 59.4 per cent drop in the value of loans approved outside serviceability.

As a result, the share of loans approved outside serviceability fell from 4.4 per cent to 1.6 per cent.

March quarter Quarterly change Annual change
Total new residential term loans to households approved $89.3 billion -11.7% 9.5%
Owner-occupied $58.0 billion -11.4% 3.9%
Investment $31.2 billion -12.2% 21.7%
Low-documentation loans approved $377 million -8.9% 42.8%
Interest-only loans approved $32.4 billion -14.7% 13.8%
Other non-standard loans approved $142 million 1.4% 21.4%
Third-party originated loans approved $43.2 billion -12.4% 14.0%
Loans approved outside serviceability $1.5 billion -57.8% -59.4%
LVR 60% and under $22.8 billion -9.5% 12.8%
LVR 60-79.9% $46.8 billion -12.1% 8.5%
LVR 80-89.9% $12.7 billion -12.8% 14.5%
LVR 90% and above $6.9 billion -13.7% -2.2%

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Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

What happens if I don’t know my monthly repayments?

Your repayments should appear on your bank statements or your internet banking. If you make weekly or fortnightly repayments, make sure you convert them to monthly calculations.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.

We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.

 

Why do I need to enter my current mortgage information?

We use your current mortgage details to calculate the potential savings if you were to change lenders, and also to help us point you to loans that may meet your needs.

For example – if you live in the house you own, we’ll make sure we show you the owner-occupier rates, which are typically cheaper than investor rates. Or if you have less than 20% equity in your property, then we won’t show you the deals that require a greater amount of equity.

How does it work? What are the steps involved?

To check your rate, start by entering your contact details and home loan information at ratecity.com.au. We’ll compare your current home loan to other options in our database, and let you know how much you could save by refinancing.  

If we can’t beat your current rate, you can claim a $100 gift card by confirming your home loan details with us.*

How do I find out my current interest rate and how much is owing on my loan?

Your bank statements and/or your internet banking should show these details. If you are not sure, call your bank or estimate.