An Australian banker explains recent changes to loan facility limits and pricing. Borrowers have two options to choose from, and the speaker urges a response by deadline to keep favorable terms on home loans.
Well, I'm sure you're aware the property markets are white hot at the moment in Sydney and Melbourne. Apra, the industry watchdog, have put a lot of heat on the banks to try and cool that property market. As a result, the banks have had to change the way they lend and the way they price their lending. So the banks have now forwarded that through to us as a consumer, and they've said, if you want to keep your facilities facility limit stable and not reducing, for example, you've got a $100,000 facility. If you don't want that $100,000 facility limit to reduce even though you owe $90,000, then they'll increase the price for that risk. They see property prices probably retreating a little bit over the next two to three years. And so they don't want the properties that they've got loans on to be underwater where you owe as much as what the house is worth. And so what they've given us the option of saying, if you want a $100,000 loan facility, and if you want to have it reducing every single month like a standard principal interest loan, then there will be no change whatsoever to your annual loan. However, if you want to keep that $100,000 loan facility and not have it moving at all, then they'll have a premium for that pricing. So very little difference to you. The fact of the matter is, if you have a facility limit of $100,000, but you owe $90,000, all that's going to be happening is that every single month that facility limit will be reducing as your debt is reducing limit. Day one is $100,000. After the first month, the facility limit will be $99,700. So that facility limit ceiling just keeps moving down. I think it's a positive thing. It guarantees debt reduction. It guarantees you'll never go back to where you started and it'll be moving ahead financially. So you're all going to be receiving a letter from the lender. This letter is going to go through what the changes are and how they may impact you. You've got two options. Option one is to do what I'm doing, and that's to have my loan facility reducing each and every month as my loan balance is. If I've got a $100,000 loan amount, that means my facility limit next month is $99,700, but I only owe $90,000. So I've got a nice little buffer there that's not going to affect me at all. Option two is you can keep doing what you're doing. But because your facility limit isn't going to be reducing, even though your loan balance will be still reducing, it just means that the bank's going to price that a little bit of a premium and there's going to be a slight interest rate rise there, which you can certainly opt for. But personally, option one, for me, I want to have my facility reducing as my debt is reducing. It guarantees debt reduction and means I'm going to be moving ahead. So if you want to take full advantage of option number one, like I am, we've sent you a conversion form. You just need to sign that and take a photo on your phone and get that back to us. Or you can fax it back to us or email it. As long as we get that conversion form by the 5th of September, we'll make the change and from there your rate will stay exactly the same and you'll continue reducing your debt. So, in summary, I think this is a great thing. It guarantees you're going to be reducing your debt each and every month, which is what we're all about here at Crown, helping you own your own home sooner. If there's any questions, give us a call or an email. We look forward to speaking to you soon.
