News of interest rate hikes is hard to escape. For most Australians looking to get a home loan, the rise in rates may affect them in ways they haven’t realised. Here’s a brief guide to why high interest rates could seriously impact your home loan application – and how a mortgage broker can help.
Why are interest rates increasing?
Through the COVID-19 pandemic, low interest rates helped stabilise the economy, but inflation has since risen sharply. To bring inflation back to a manageable level, the Reserve Bank of Australia has increased the cash rate target several times in a short period, affecting interest rates on both investments and borrowing. Importantly, lenders don’t assess your ability to repay on the current interest rate – they use an assessment rate.
How can assessment rates put a pin in new home loans?
The Australian Prudential Regulatory Authority (APRA) increased the minimum buffer banks must apply when assessing home loan serviceability to 3.00% above the loan product rate. That means your application may be assessed at over 3.00% above the standard interest rate – disheartening for those who’ve saved a deposit only to meet lender resistance due to high assessment rates.
Should I use a mortgage broker?
Many lenders can only offer their own products or rates. Sifting through terms, ongoing fees, comparison versus assessment versus interest rates, and the higher assessment buffer can be overwhelming. Mortgage brokers understand the lending market, have access to a range of lenders, and can source the best product, rate and structure for your circumstances.
Accessing the best local mortgage broker
There are many costs involved in buying property – don’t let opportunity cost be one. Whether you’re looking at an owner-occupier or investment property, our lending team at Black Pen Lending can provide expert home loan advice as trusted mortgage brokers in Orange, NSW, committed to sourcing finance options in your best interest. Reach out today to get in front of the right lender and into your next property.