Boothy Bites Episode 4 - The RBA July update| Lenders to look out for | New Brokers in Lydian

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Transcript:

Jackie
I want to welcome back to these bites for July. We have the man, Mr. Booth, with us again. So welcome back, Chris.

Chris
Thank you very much Jackie. Great to see you again. And, look,  apologies for the June Boothy Bites. Obviously, we're on a bit of a holiday in the UK. And can I just say for people watching, I love your hair, I love what you’ve done Jackie, well done!

Jackie
So a bit of a back story for those watching, just quickly. I actually canceled
the recording of this yesterday because my hair wasn't looking good. So I do look good today. Thanks Boothy

Chris
You are welcome. It looks wonderful. And I've made an effort to today as well.

Jackie

Yeah, I see that. So, enough hair talk. Straight to business. So what's happening with the RBA? Good news, ay?

Chris
Yeah, well, look,
I mean, we've got a bit of a preview which was good, you know? And I think, you know, with all the news around right now I think we just sort of deserved a bit of a break. You know, the 4.1% cash rate, which the RBA, or the Reserve Bank, decided to keep on hold
for another month - it’s good.

I'm also partial of that. I think the next six months are going to be tough. There's a lot of people
who've actually had fixed rate loans, you know, into that Corona Virus period. And they are maturing over the next six months. So there's a swag of people coming off 2% interest rates now reverting to that standard variable, which is, you know, close to 6% and in some instances higher. So I think that's sort of negativity
for that. 

You know, the average household is a borrower and having to just spend sort of budgets
and spending habits and the impacts of that. I think the RBA did the right thing
by sort of pause right now.

Jackie
Yeah, sure. And so what about predictions? Is there any predictions out there
for rate cuts or anything like that?

Chris
It's interesting. I did put a little snippet on my Boothy Bites email to a lot of the partners just yesterday. So with the sentiment right now, the majors that they will do that forecasting.

So we've got ANZ, NAB, CBA and Westpac
and they're awfully similar. So they're expecting, you know, over the next few months a couple of, you know, one or two more interest rate hikes over this next six months. And then the sentiment as a collective is that from the Reserve Bank then is at the top of that cycle, you know,
being sort of mid to high 4% for a wee while. 

And then the sentiment then is that hopefully the inflation's pull down at that time and then back to that more normal 2 to 3% environment which Reserve Bank is comfortable with and then the Reserve Bank then would probably need to address the slowdown in the economy about this quick interest rate hiking has actually caused. So that potentially means that next year
we see some reductions in interest rates where the cash rate then
goes back to sort of a more normal rate at around about that 3.5%, maybe 4%. 

So we're in a bit of a cycle to go through, but certainly there's a pause for thought right now,
which is great for borrowers like myself means something on the horizon, something to look forward to at least. It’s good news.

Jackie
What about the lenders? So what are they doing at the moment? Any lenders catching your eye?

Chris
So the lenders right now,
I mean, that's a really interesting conversation with a lot of the lenders
now are starting to change their serviceability policies
to afford the luxury of refinancing. So what I mean by that, you know, for clients looking for a cheaper interest rate, many of the lenders are locked into these traditional assessment rates where they've got to use a 3% buffer on the actual rate.

So that means many of the lenders have been using sort of eight and a half per cent interest rates to demonstrate affordability, which is an extremely high interest rate. Now we've got a bit of latitude, so, so flexibility around that.

Well I think APRA and ASIC and now for an affordability test for refinances, the banks are allowed to use a 1% buffer. So that means, you know, if interest rates are 6%,  the assessment rate for a refinance at the moment that is 7%. So again, I suppose it empowers people to look at their interest rates and then have to go to generally to shop around and then no longer credit lock from that serviceability perspective. So there's some policies there
which are really helpful for people looking to get a better rate if they are maturing off those fixed rates some of the lenders
will be working right now.

So Qudos Bank, which is the ex-Qantas Credit Union, they've got a 5.59% variable which is extremely cheap. Now how long they keep it at 5.59% because it is a lot lower than that. Many of the ones out there to be seen. But certainly at the very attractive rate for their basic product there.

Macquarie Bank has always been in the market. So, if you have got a low loan to value ratio,
strong debt to income ratio and you know, a good application for lending,they've got a 5.79% package, which means you get offset, neutral and all of that really cool banking stuff that you need for a good loan. 

And then for investors, if we're looking at investors, those Firstmac is going to be 5.74% interest only interest rate.Now that is interest only and them for such additional interest only in price slightly higher, which is cheap at this time it's the same rate.So that's an attractive rate for interest only repayments, which may be helpful to get your budget
and cash flow back in order.

And then lastly, talking about fixed rates, I think there's a couple of attractive rates on offer from Bank of Australia. They've got a 5.8%, three and five year fixed rate
and for those both I believe are interest only as well. So yeah, so there's some cheap rates. But again, you know what I'm saying to our clients let's have a look
at what the current interest rate, let's go back to existing lending fight for a better rate. If that's not available from that lender
and they’re giving you still a low deal well then let’s have a look and see what options to move for some of these cheaper rate. But again, it is a difficult market, but certainly lots of lenders are very supportive to your business.

Jackie
Well, yeah, sure. So plenty of options that everyone by sounds of it.

Chris
Yeah, sure.

Jackie
And so what about the property market? Are you seeing any trends
there at the moment?

Chris
So, I mean, last year really we - as Mortgage Brokers with, you know, as a collective, you know, a national broker base. Most of our applications
were for refinances. We have very few clients actually thinking about or looking at purchases, you know, and it was a strange time for cause traditionally, we’ve got, you know, clients who are looking to buy their first home or upgrade their family home and things like that. 

So that was out of the market last year. But we'll probably March or April, we'll start to see a few more pre-approval come back into our application system, which is great to see. And again, you know, our brokers are working with first home buyers because some changes to those grants. So in particular the first home buyer grants with some changes. So the first home loan deposit scheme and some more space is available and that changes to that actual delivery for clients as well.

So we've seen quite a few first time buyers banked by that first price. Second to that, we've had a lot of pre-approval in the market. Sorry, in our business, getting prepared to buy their, you know, upgraded family home. 

So now what that's meant is that, you know, just seeing from my street alone in Randwick, we've got a couple of options
down our street which I tried to attend just to get a feel of the flavor, what's happening. And their busy, you know. So, there’s lots of buyers there, lots of people registering, watching what's happening and the price that the properties are selling for, are certainly, you know, they're kept pretty high and in fact property prices across Sydney, Melbourne and Brisbane seem
to be appreciating and not going down.

So that demand is excessive for supply that's out there currently. And I think we'll start to see you know, we'll see that for the next couple of months, hopefully, though, and we are seeing that now. You know, there's a bit of stress on some of the family budgets.

We'll start to see a few investors to sell their investment property so we can move recapitalize their balance sheet to pay down some, pay off debt, reduce the cost of their home loans, and also maybe reduce their personal home loan as well. So, you know, I do expect a few more properties in spring period to come to the market.

So hopefully that supply then starts to meet the demand and potentially the property prices either stay the same or potentially come up and pull off a little bit.

So yeah, we're seeing lots of people trying to buy and hopefully they get they get the success they're looking for in buying surely.

Jackie
Yeah. Awesome. And so what about back home? Any news that Lydian HQ? I hear we've got some new faces on board.

Chris
Yeah, it's exciting times. Yes. So, you know, on our quest to become a national brokerage company two of those remote cities in Australia, it's really hard to get to them and tough to fall, Perth and Adelaide. We found two fantastic people, so we've got Harsh Joshi over in Perth who’s joined the team. And yeah, look, he is a wonderful man he’s very sensible. He’s an ex-accountant and I mean you've done the broker Bio, so he is a good guy. Hopefully you can help me be a bit more flexible as well. But Harsh has joined us in Perth which is a really good addition to the team.

And then secondly, we've got a more of a mature person over in Adelaide. So we’ve got David who’s similar sort of demographic to me who's been in financial services and finance and things for many many years. And he’s already working with a couple of partners in our Adelaide team So geographicaly now, Sydney, Melbourne, Brisbane, Adelaide and Perth which is pretty cool! this a very exciting!

Jackie
we've nearly got it all covered and Northern Territory and then we've got all of Australia coming.

Chris
We're still trying to find a quirky dude to join us in the Gold Coast,you know anyone? 

Jackie
I'll keep an eye out for you,

Chris
Sorry, I should say "Dude or Dudette"

Jackie
Right, we'll “Dude or Dudette” Well on that note, I'm going to go and look for a Gold Coast based broker - a dude or dudette Gold Coast based broker. So Boothy, thank you for your time July update as awesome as ever and we will see you on the next month! Thank you so much. 

Chris
I just want to say good shout out to Rocksy and Joanne Wynn for holding down the fort and obviously the brokers while I on Holiday. It’s wonderful to go away and have that break, but also know that the good people of Lydian have got my back and I’ve got the broker’s back as well. And as you do, Jackie, as well.

So thanks guys, I’ll look forward to the month ahead and also August Boothy Bites. So I'll see you soon.

Jackie
See, thanks Boothy. Bye.

Chris
Ciao.