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There has been a great deal of movement in fixed rates over the last three months, and for some borrowers fixing has become the "new black".  It’s easy to understand why borrowers are being tempted, particularly with some three year rates sitting well below the 5.5% mark.
Generally speaking most borrowers are motivated to fix their loan balance for one of two reasons.  To create repayment certainty and stability, or, to beat the market at a rate that will be consistently lower that their standard variable for a fixed period.
And when fixing a rate, there is no denying that timing is everything.
Those looking to beat the market often wait until they can establish that fixed rates have reached their lowest point in the current cycle – but because rates can change very quickly, they often miss out.
Over time the fixed versus variable conundrum has continued to present a challenge to borrowers curious about whether fixing will deliver a cheaper result over time, and this is most prevalent when interest rates are in a downward cycle.
The majority of borrowers, however, are generally content to remain with their standard variable arrangement, thereby retaining all the flexibility and features a fully optioned loan delivers.
Even though the average standard variable rate of the big four banks is around 6.62%, most existing standard variable rate borrowers are sitting around 20 basis points either side of the 6% mark.  And with variable rates tipped to fall further, the temptation to lock in is growing.
This is where the split loan option of part fixed, part variable becomes the popular alternative, offering the flexibility of a variable loan with the payment certainty of the fixed arrangement.
This option is fast becoming the borrower preference over 100% fixed, with most lenders offering attractive fixed/variable combinations aimed at borrowers wanting the best of both worlds.
Over time, however, traditional fixed loan arrangements have become more flexible in their own right – with additional repayments allowed for most products.  But that being said, borrowers often overlook the additional criteria that applies to breaking fixed loans during the term.
It is therefore incredibly important that borrowers read all of the terms and conditions associated with the fixed loan arrangement. Because if, for example, there is any chance that the borrower may need to sell the property or break the loan while during term, he or she might be better off to remain on a variable arrangement, as those costs can be prohibitive.
In terms of what we see happening at the moment, the most popular fixed rate period still remains the three-year option. However shorter terms are also becoming a popular choice, given rates are on a downward trend.
Only during the last week, we have seen one-, three- and five-year rates stabilise with a slight increase in some bands, so I don't believe we can assume that fixed rates have bottomed out just yet –  this will only come as they stabilise.
My suggestion therefore is that if borrowers are looking for a better deal – whether it be fixed or a split arrangement – they may want to approach their lenders first to minimise their costs of refinancing, or do their research and find the right combination for them.
But remember, a good and efficient loan arrangement is not simply just based on having a low rate.  Features, flexibility, fees and the right guidance are just as important.  You want your rate to be competitive – but above all, you want your loan to work for you.
Lisa Montgomery is CEO of <a target="_blank" href="https://www.resi.com.au/">Resi Mortgage Corporation</a>
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Timing is everything when it comes to fixing your mortgage

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When it comes to demonstrating genuine deposit savings as part of the home loan application process, some borrowers see it as an inconvenience.  Lenders, however, have a different view.
Proof of a savings pattern will not only illustrate to the lender the borrower’s ability to consistently set aside funds for a specific purpose, it demonstrates the borrower's preparedness for what will most  likely be a large monthly commitment.  This preparation is most important for first-time buyers who are unlikely to have been exposed to high ongoing monthly repayments.
Most lenders these days will require a home buyer, particularly a first-home buyer, to demonstrate genuine savings when obtaining a mortgage; this is usually applicable if they are borrowing more than 85% of the value of the property being purchased. This is traditionally demonstrated by providing at least three months of bank account statements in the applicants name showing they have accumulated the cash equity required to complete the purchase.
Lenders will scrutinise these statements to ensure that the borrower has demonstrated some kind of savings pattern and pay particular attention to lump sum deposits, to ensure that these are not gifted or borrowed funds.
It is quite common for parents to assist their children in purchasing their first home. If this is the case and the parent’s contribution is an unconditional gift to their child and not a repayable loan, a statutory declaration can be completed and used as support documentation for the loan.  It is important to note, however, that the lender may still require the applicants to demonstrate a minimum of 5% of their own genuine savings to contribute toward the transaction.
Less common is the instance where a parent or guardian may loan the applicant a sum of money to assist in the purchase of the property. In this case, the lender may still require the applicant to contribute a minimum of 5% of their own genuine savings to the purchase, but other criteria may also apply.  The lender may ask for a statutory declaration from the person making the loan outlining the terms of the loan inclusive of the regular repayment amount.  During the assessment process the lender will ensure that the borrower can afford to meet their future home loan commitments as well as all other commitments (including repayment to the parent or guardian), without incurring hardship.
It’s essential for first-time buyers to seek guidance in relation to lending criteria early in the home buying journey.  This will ensure there are no surprises or impediments when you are ready to buy.  Meeting all the requirements of the lender will ensure a smooth pathway to home ownership.
Lisa Montgomery is CEO of <a href="https://www.resi.com.au/" target="_blank">Resi Mortgage Corporation.</a>
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What first-time buyers require to secure a mortgage

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Mystery flights and mystery hotel deals are popular. Why? Because for many people, not only does the price appeal, but there’s also a certain mystique attached to not being aware of where you are going.
But these "mystery" deals are only defined moments in time, so if we come away thinking we could have done better, or would have preferred a different experience, we can easily put it behind us and move on.
However, when you’re making the biggest financial decision of your life, do you really want any ‘mystery’ associated with it, particularly when it’s such a long-term and significant arrangement? After all, this is your financial security you’re dealing with here.
In my long career in the financial services industry I have always been a huge advocate of research. And when you are looking for a home loan or any other financial product, the best research is the research you do yourself.
There are some great financial services comparison websites out there where you can start that research and compare what’s available.
And in the course of that research, you will undoubtedly come across a variety of marketing offers you can take into consideration, along with your research.
One offer that recently stood out <a href="/news">was a "mystery" home loan deal</a>, which offered a significant reduction in the annual percentage rate of the big four banks, but did not mention the lender.
So what impact does this have on a borrower when they see such an offer, but don’t have all of the details?
Clearly they would find it attractive, but further research would show there are equally competitive rates aplenty in the mortgage marketplace.
There is no doubt that a low interest rate is the major priority for all borrowers choosing a home loan, but making that decision based simply on the interest rate is a common mistake, as there is much more to a mortgage product than rate alone.
And that’s because no two borrowers are the same.
We all have different needs and requirements for how we want our mortgage to perform for us. So when you’re looking for a loan, it has to be a personal decision not based on one thing, but on a range of aspects relating to how you manage your wealth through your different life stages.
Therefore, a borrower needs to also look at the fees, features, flexibility, structure and service attached to the loan - and once they do, there are many more questions to ask.
For example, are there low or no fees attached to the home loan?  What are the specific features and are they the most appropriate ones for my circumstances? And is the structure going to be flexible enough for what I may need now and into the next stage of my life?
However, above all else, not knowing the service proposition attached to a mortgage is a bit like marrying someone you’ve never met.
You need to take the time to choose wisely here, because the relationship with your lending professional can be one of the most significant in your life, particularly in regards to setting up an efficient and effective financial platform.
And yet, is it still often something people undervalue in favour of obtaining the lowest interest rate possible.
In fact, the expertise and guidance of this person can open up doors to wealth creation and deliver information that can save you money on interest, reduce your loan term and strengthen your overall financial position.
You should closely consider your lending professional as your first point of contact when enquiring about a mortgage, as this relationship is as important as the interest rate.
With many of us having complicated financial structures, it’s invaluable having the right lending professional there to advise you, educate you and above all empower you to become a better financial manager – and there’s certainly no one-size-fits-all solution.
Like choosing any partner, you need to know you can rely on someone to be there for you to take those next steps and never more than when your finances are involved.
In such a dynamic lending environment, there is much for borrowers to consider and explore – and there should be no mystery when it comes to choosing your mortgage.
Lisa Montgomery is CEO of <a href="https://www.resi.com.au/" target="_blank">Resi Mortgage Corporation.</a>
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There should be no mystery when choosing a mortgage: Lisa Montgomery

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Australians love a home project and are spending more on renovations each year, so as the trend continues towards renovating – rather than upgrading, to adapt to the softer property market, borrowers really need to maximise any money they outlay to ensure those funds are put to good use.
Borrowers need to be savvy about exactly how they spend their money on renovating, so there is a genuine financial advantage to their decision to retain and improve their existing property, rather than move on.
There's no point deciding to go ahead with a renovation unless you have weighed up all the benefits of renovating over upgrading.
Your analysis should include determining whether you really are comfortable and ready to give up not just the property, but all the other reasons you live there – including familiar infrastructure such as local schools and transport links, not to mention friends and neighbours.
That's the more emotional side of the equation. But then you also need to be realistic and crunch numbers on all the possible outcomes of buying and selling in the current market.
In the end, if you do finally decide that renovating is the better option for you, you need to be careful about how you spend your money by developing a blueprint to follow, based on finely costed, definitive plans.
One of the main issues that will determine how you spend your budget will be the primary reason you are renovating – i.e. is it to on-sell; improve rental yields; or improve your lifestyle?
There is generally less emotional attachment to renovating an investment property than one you will have to live in, but ensuring you have improved the property in both functionality and value – without over-capitalising on your spend – should always be the prime objective.
Then it will come down to whether the renovations are mainly cosmetic or structural.
If the renovations are largely cosmetic, there is a lot less to consider. It's when you get into the structural type that you really have to do your homework by ensuring that any additions are in character with surrounding dwellings and that it will add to the resale value, among other things.
For larger projects, despite the reasons for renovating, the planning should still come down to considering 12 key points:
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<li>
START WITH A LIST: Make a list of everything you want to do, not just in one room, but around the rest of your home too, then prioritise that list. This will allow you to decide whether you can stage the renovation, or whether you're better off to do it all in one block of work. Once this is done, you can seek more detailed advice from architects, draftspeople and builders. </li>
<li>
SET THE BUDGET: Work out how much you actually have to spend and ensure if you are borrowing the funds to do this they are firstly approved and that you're comfortable with the additional financial responsibility you will be taking on. Also, if you are significantly changing a layout or adding floor space, ensure your plans comply with any council regulations and allow sufficient time and money for any plans to be drawn up, submitted and approved. </li>
<li>
OBTAIN COMPETITIVE QUOTES: Obtain at least three quotes from reputable builders and tradesmen and ensure the quotes compare like for like. And then, even when the quotes are accepted and contracts are finalised, ensure you have a contingency budget. Speaking to others who have project managed renovations beforehand will be a wise investment of your time. </li>
<li>
THE DIY FACTOR: Despite the popularity of home renovation programs, very few have the skill and experience to do everything themselves. Sure, you can save some money by putting your own sweat into it, but ensure any specialist jobs are carried out by licensed tradespeople. </li>
<li>
INSURANCE: Ask about insurance for each tradesperson as anyone working on your property needs it. Otherwise the liability may rest with you. </li>
<li>
KEY AREAS OF THE HOUSE: Any buyer routinely pays close attention to the state of bathrooms and kitchens, mainly because they're high-traffic areas. As a result, these rooms can justifiably take up a significant portion of your budget, as long as you don't go overboard with costly appliances that won't be appreciated within the context of the rest of the property. </li>
<li>
POOLS: Swimming pools may seem like a luxury but won't always increase the resale value of your home, particularly if it overcrowds the rest of your outdoor area. Balance out your own need for a pool, rather than just installing one because you think it's a property must-have. </li>
<li>
GARAGES: A garage can add considerably to a home's value, as can any off-street parking facility, particularly in high-density, metropolitan areas. So whether you're renovating an investment property or your own property, the addition of a car space is usually a wise one. </li>
<li>
ADDING BEDROOMS: This will also generally add to a property's value, particularly if the property is in a family-friendly area. However, there's no point creating a bedroom for the sake of it, if it's so small it's more likely to be used as a utility room. Buyers can readily see through this. </li>
<li>
PAINTING can make or break a renovation. Good paintwork can instantly lift the overall quality of a house as can the level of preparation that goes into the job. Don't underestimate the power of the paint – it can transform even the drabbest of homes. </li>
<li>
COLOURS AND FINISHES: Keep your overall look co-ordinated and simple in taste, particularly if you're looking to sell in the near future. A consistent, muted style that flows from room to room is safer than something that's too niche and stands out for all the wrong reasons. </li>
<li>
LANDSCAPING: The indoor/outdoor room is now a popular part of the Australian lifestyle, so allow for a percentage of your overall budget to be spent on landscaping so you can complement the work you've carried out inside the house. Even if your budget is modest, basic greenery and clean, functional outside areas will only improve a property's appeal.</li>
</ol>
Lisa Montgomery is the CEO of the non-bank lender <a target="_blank" href="https://www.resi.com.au/">Resi Mortgage Corporation</a>
 
 
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Twelve key points to consider before you start home renovations

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The current market turmoil comes at a time when consumers are already exhibiting a great deal of restraint.
Since the last interest rate rise in November, we have seen a lot of information from the RBA and the media suggesting to consumers that there is another rate increase or two during that year
That, combined with the high cost of living, rising fuel prices and energy costs and the carbon tax, has an effect on consumers that has not been seen before.
The RBA has not really done anything. It has just talked about interest rates having to rise. This has had the desired effect on borrowing and spending behaviour. People are now very conservative.
In fact, I don’t know of another time since Australians have been so responsive to this market noise.
Ten years ago and beyond people did not even know when the RBA monetary committee sat. But people are so highly leveraged these days.
Before the last rate decision in August, someone asked me if a rate cut would make a difference in consumer behaviour. I said no, not in the medium or short term.
Consumers are not looking for a rate reduction but some market stability.
A reduction will help but what is really needed is a period of stability. This will mean people can go back to upgrading their existing properties and buying investment properties.
We are undergoing a cyclical change, but the property market is not homogenous. This is a mistake a lot of property commentators make. You can’t discuss the market holistically.
Some areas have had a slight correction, but other areas will prosper such as regional areas, those that are undergoing gentrification, those where local government are engaged, and those where there is a diversity of industries.
These are areas where a really savvy property investor can prosper.
I was at an investment and property expo in Sydney recently and have never seen a room of people so engaged and interested in building their property portfolios.
People are talking and listening, and willing to take control. Just look at self-managed super funds. People want to take control of their future – they are not willing to put it into other people’s hands.
Lisa Montgomery is CEO of <a title="Resi" href="https://www.resi.com.au/" target="_blank">Resi Mortgage Corporation</a> and a regular media commentator.
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Lisa Montgomery

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