Trending News 24 June

Westpac backs down on lowering serviceability requirement

Westpac announced on Thursday afternoon that it would allow loan officers some flexibility to approve home loan applicants who failed to the meet the 7.25 per cent serviceability threshold. Less than one day later, the big bank has changed its mind, after discussions with the banking regulator.

A spokesman for the Australian Prudential Regulation Authority told the Australian Financial Review that they were surprised a big four bank had lowered the serviceability floor without consultation. Westpac’s move would have increased the borrowing capacity of home loan applicants by up to ten per cent.

RBA set to deliver a hat-trick of rate cuts

ANZ Bank is predicting the Reserve bank will cut the official cash interest rate twice more in the next two months, delivering three 0.25 percentage point rate cuts in three months from June to August 2019.

Reserve Bank board meeting minutes released last week state that further cuts to the cash rate are “more likely than not” because of low GDP growth and weaker than expected employment data.

ANZ economist David Plank said the clear signal to the market in the RBA minutes is unusual.

“We clearly need to take note of this unusually strong signal.”

In a speech last week, RBA governor Philip Lowe said:  “The possibility of lower interest rates remains on the table.”

Borrowers discovering smaller banks and lenders

Official data from the banking industry regulator shows that more home loan borrowers are discovering the smaller lenders with home loan sales growing faster among lenders outside the big four banks.

The volume of new home loans approved in the first three months of 2019 was down 16.5 per cent compared with the March quarter 2018.

However, over the last year, the mutual banking and credit union sector grew the number of home loans approved by 8 per cent, while the big four banks’ new home loans grew by just 2.6 per cent.

Australia’s credit unions and mutual banks increased the volume of their loans under administration by 1.6 per cent in the first three months of 2019 while the big four banks total assets declined by 0.4 per cent in the March quarter.

QFF changes favour economy class

Qantas’ overhaul of the Qantas Frequent Flyer points scheme favours members wanting to exchange their points for economy class seats over the scheme’s traditional base of loyal customers in business class.

The changes result in fewer points required for economy flights, increased seat availability for QFF points redemption, and reduced carrier charges. The Sydney Morning Herald reports that the new points formula favours the majority of QFF members who only fly economy and only accrue a “modest” amount of points. Traditionally these people have had problems spending or using their points whenever they wanted.

Would you take out a 40-year mortgage?

There are now a handful of lenders offering extended 40-year terms on home loans, up from the standard 25 or 30 year terms.

Forty-year mortgages offer lower repayments but he total interest bill over the term of the loan will be much greater. Many forty year home loans are targeted to first home buyers struggling to meet the repayments required for a shorter standard home loan term.

Andy Kollmorgen, from consumer group Choice told ABC that: “The longer the loan, the lower the monthly payments.

He followed up with: “The longer the loan, the more interest you pay in the long run, almost double, hundreds of thousands dollars more with a 40-year loan as compared to a 25-year loan.”