By NT Aussie Broker, Dick Grant.
One of the frustrations of a mortgage broker is that we want to help everyone that we speak to. Unfortunately this is unrealistic and it is getting harder and harder to get loans approved for our clients. I see fantastic people getting declined for finance who not that long ago would have had no problems obtaining finance, so many great people fall through the cracks because they are not meeting the various lenders criteria.
To be fair to the banks, most haven’t imposed huge barriers or made people jump through more hoops than before, in most cases their policy hasn’t changed, it’s more that they are adhering to their existing rules and are not prepared to look outside the box so to speak on an individual basis. One new aspect to lending is the introduction of an automated measure of “scoring” an application before an actual assessor even looks at a file. Many loans get declined at this stage and no reason is given. Some banks will not look at the file once it fails this new measure.
There are many reasons for this, obviously we are still feeling the effects of the global financial crisis, and banks definitely became more conservative in a matter of weeks while they waited for the effects of the downturn to hit our shores. The banks also shed staff to try to offset the cost of the impending crisis losing a lot of experience along the way.
As I’ve discussed previously Australia and the Northern Territory in particular was able to ride out the effects of the crisis better than most, but the flow on effect from this will have many consequences for years to come. Globally, funding for mortgages has become a huge issue. Investors who a few years ago were more than happy to provide funds for mortgages are very hesitant to reinvest in this manner as so many were burnt when the huge lenders in the U.S.A. and Europe collapsed.
So what does this mean to the average person seeking a mortgage in the Northern Territory?
Australia’s major lenders do not have access to the same amount of funds as before, so they have become very particular about whom they will accept as potential clients. Some have chosen to raise their interest rates above the reserve bank’s recommendations to slow the level of inquiry. Others have decided that instead of raising their rate they will only take the pick of the crop and if you are not perfect in every respect they simply don’t want you as a client. They don’t have the capacity to consider which parts of Australia have performed better that others, so an application in Darwin or Alice Springs is assessed using the same criteria as an application from the Gold Coast or Cairns.
From a mortgage broking perspective this has made the past 12 months challenging to say the least, but what it has done is made good mortgage brokers a vital tool when it comes to obtaining finance. Brokers deal with lenders on a daily basis and quickly learn who the better lender is to use for each individual circumstance. What one bank may be happy to approve may not even get past the initial computer assessment with another.
The best advice that I can give anyone at the moment is if you are even contemplating purchasing property or refinancing, speak to a mortgage broker who has come recommended to you at the earliest possible time. They can advise you on whether you are in a position to obtain finance and can also recommend the lenders most likely to help you. If you are not quite in the best situation right now to get finance, they can also advise what you will need to do to obtain finance in the future. They can also look at your existing loan and make sure that you are still getting a great deal.
Many people in the past have taken out mortgages with all sorts of features to help them pay out their loan early. Everyone goes into a mortgage with the best of intentions and many take out loans with features that they simply don’t use, but they pay a premium for these options. Use your broker to make sure what you have set up is being utilised properly as they may find a way to improve your situation.