Updated: May 15, 2019
We are constantly bombarded by media and advertising about cheap loans and making sure you have the lowest rate. We are now seeing a wave of Fintech wannabe's telling you they will get you the lowest, cheapest, best rate available!
So when is the lowest rate not the best rate??
Well, what many of these banks and financiers are not telling their potential customers is that these rates, many a time, come with risks. Risks that your new bank or provider will only meet your needs of a cheap home loan for the first few months or a couple of years before they can no longer meet your other needs and it will come at a cost!
There is detailed research and studies that have shown the price, although important, is generally not the main reason for consumers to purchase a product, especially financial products. So why then do we let rates and price hijack the conversation when it comes to borrowing?
Many might say that its because buying property will be one of, if not the biggest investment in your life, others know how much emotion is attached to the dream, while many just love to hate the banks!
The elephant in the room is that over the last 18 months we have seen a significant overhaul in the bank's risk appetites with APRA and ASIC legislating changes that have affected the banks ability to increase sales via a come one come all approach. Many will know foreign income earners, investors, interest only repayment makers and many more have been targeted to reduce the potential risks in the property market as well as the risks around potential for increase in defaults as some borrowers will struggle after gorging themselves with debt over the last decade.
So why can't I have cheap and good loan, well maybe you can, if you or your broker does the hard yards and look at your longer term strategy and structural needs. But unfortunately many just won't do the work or take the time.
Now I'm stuck!
Working with your bank should be treated like any new relationship, and not just like buying a loaf of bread. You and your new bank need to understand each other. This means your new bank will want more information about you than ever to be comfortable with lending you money, but more importantly yo