Mon, 2008-03-31 16:20 — Guest
Monday 31st March 2008
St George Bank change to Variable Home Loan Interest Rates - effective from Thursday 3 April 2008
Due to continued higher costs of wholesale funding St George/BankSA will increase the interest rates on its Variable Rate Home Loans by 0.10 percent per annum. This new rate will be effective for both new and existing borrowers from Thursday 3 April 2008.
St George Bank variable interest rate home loan products increasing by 0.10 percent are as follows.
- Standard Variable Rate
- Basic Home Loan Promotional Rate
- Portfolio Loan Variable Loan
- Discount Variable
- Seniors Access Home Loan/Seniors Access Plus Home Loan
- Low Doc Home Loan
- Low Doc Portfolio Loan
- No Deposit Home Loan - Quick Start Option
- No Deposit Home Loan - Flexi Deposit (LMI) Option
- No Deposit Home Loan - Loan Extension Fee Option
Standard variable home loan interest rate discounts
This latest 0.10% rise together with the 0.35% rise on the 13th March 2008 is a combined increase to the standard variable interest rate of 0.45%. St George Bank interest rate increase March 2008 (link added by admin)
With other banks still currently offering a standard variable interest rate that is 0.15% less than St George our present 0.80% discount is now actually costing 0.05% more, without factoring in any additional negotiated discounts from the other lender.
Many people who are receiving the 0.90% discount from St George are now comparatively receiving only 0.05% discount compared to the non negotiated standard variable discount from another major bank.
Variable interest rate increases
There have been additional increases to the variable interest rate home loans from other lenders during March.
There has been 0.45 percent and 0.50 percent increases to the standard variable interest rate from some lenders and most fixed interest rates have increased during March 2008 at least once.
Carefully check the available options and calculate the benefit, if any, of refinancing to a better deal.
Using a finance broker and an up to date loan comparison system can ease the process.
The varying gap in the standard variable interest rate home loan is an issue that requires careful monitoring for anyone with their home loans on variable interest rates.
Before jumping ship too quickly though there are a few details that need to be checked to ensure a move might be beneficial.
Check the original loan offer documentation, and any interim documentation if the loan has been renegotiated at anytime. Almost all lenders will change a discharge fee. The average is commonly around $300.
Check carefully for any deferred establishment fees or early repayment fees. Most lenders charge at least $800 now if a home loan is fully discharged in the first 3 or 4 years. Some lenders may even charge 2% of the original loan amount it the loan is paid out in full any time before 5 years from when the loan settled.
Work out the loan to value ratio. To calculate this divide the required refinance amount (loan size) by the property value. e.g. A loan of $220,000 divided by property value of $380,000 = 0.57894736842 then multiply this by 100 = 57.59%. The reason for calculating the loan to value ratio is to check if lenders mortgage insurance will be required. In this case as the loan to value ratio is less than 80% for a full documentation loan and still less than 60% for a low documentation loan there will be no lenders mortgage insurance payable by the borrower in almost all cases.
Next add all the costs of leaving your current lender such as discharge fees early repayments fees if applicable, other valuations if required etc.
Now add all the entry costs for the new lender such as application fee valuations if applicable and lenders mortgage insurance if applicable. Combine the total amounts for both the exit costs and entry costs.
Lets assume there is a $350 discharge fee and a $299 legal fee with the new lender, no valuation costs are payable by the customer and no mortgage insurance is payable.
Calculate the difference in repayments by subtracting the lower repayment amount from the higher repayments. Lets assume there is a benefit of $18.20 per month in lower repayments by moving to the new lender. After adding the $350 discharge fee and the $299 legal fee for the new lender, $649, divide the combined exit costs by the savings in loan repayments per month to establish the break even point. eg $649.00 divided by $18.20 = 35.66 meaning it will be 36 months or 3 years before there may be a financial benefit from refinancing.
Don't forget to calculate in any account keeping fees for either loan as well and double check the exit costs for the new lender.
In checking or loan software database today I notice there is a basic variable interest rate home loan which is 1.1 percent less than the new St George standard variable interest rate home loan.
Compared to a borrower receiving a 0.90% discount off the standard variable this much lower rate basic variable interest rate home loan represents a saving in monthly repayments of $21.33 per month and no account keeping fees!
Remember this is also a variable rate home loan so interest rates can change.