Finance Update with Paula McKie

COVID-19 impact on mortgages and lending with Paula McKie

Sales agent Paula McKie recently caught up with Gordon MacVicar from Mortgage Choice Peregian Beach via a Zoom meeting to discuss the impact of coronavirus measures on home loans and opportunities arising from record low interest rates.

Gordon and the team at Mortgage Choice Peregian Beach are currently doing a lot of meetings via Zoom or Google Hangouts, embracing technology to continue delivering great outcomes for clients the same as we are at Coolum Beach Real Estate.

The Zoom chat between Paula and Gordon came about due to Paula wanting to offer value to past, present and future clients given the changing landscape we’re all finding ourselves in. The key takeaways are summarised below.

Banks are still lending

“If your income hasn’t been affected and it’s stable and you’re in an industry not affected, the banks are willing to lend money,” Gordon says.

“Banks realise that they’re an essential part of what’s going on at the moment. The government’s got behind them and backed them and giving them plenty of liquidity to go in there and keep the property market moving.”

Some incredible refinancing and consolidation opportunities also exist.

“Some of the refinance offers around are just amazing, like banks giving you interest rates in the low twos and giving you $4,000 to refinance across,” Gordon says.

“We’ve just switched one client from interest-only repayments to principal and interest, consolidated one of his personal loans and still freed up $700 a month in cashflow for him.

“What we’re actually seeing is a lot of clients trying to get all their ducks in a row … ‘Let’s tidy up, consolidate all our debt, because when things take off again, we want to be in a position to purchase more property.”

Renting versus buying

Record low interest rates means there’s superb opportunities for first home buyers, with properties within the $400,000 to $650,000 price point particularly attractive to this segment.

“One of the reasons why is people are looking at the numbers and they’re saying, “Well, I can either be paying rent of $550 to $600 a week or I can actually start paying my own mortgage down at around that same price,” Gordon says.

“So one of the things we like to show out our clients, if they’re sitting on the bench, “Should I continue renting or get into the market and purchase?”, if you have a 10% deposit on a $650,000 property, it means your repayments are only going to be about $580 a week.

“Now if you look around Peregian Springs or look around Coolum for example, what does rent cost around there? It seems to be around that price point anyway.”

Interstate interest remains high

Gordon says the fact it’s possible to purchase property for $650,000 or less around the Peregian-Coolum area is continuing to attract people from Sydney and Melbourne also.

“You can’t buy a one-bedroom apartment in those places with that sort of money,” he says.

“So we’re seeing a lot of opportunity and a lot of interest within that price point because you weigh it up, rent or mortgage repayment.”

All that adds up to great news not only for those looking to buy their own home for the first time, but those with property in that price range who are wanting to sell.

Freezing mortgage repayments

While there are opportunities to pause mortgage repayments if you’ve been financially affected by COVID-19, the banks aren’t making the option available to everyone.

“We’ve been having people ring us up and say, ‘Oh, we just want to put our mortgage on pause. We want more money.’ The banks have been very good if you’ve lost your job or your income’s reduced as a result of what’s going at the moment. What they won’t do is just put the mortgage on pause because you want some more cashflow,” Gordon says.

“They’ve been great for people who are in genuine hardship because they know this is only going to be for a short period of time. It might be for a few months, so they’re willing to help people who need it at the moment.

“But yeah, if you just want a repayment holiday so you can spend on Amazon, unfortunately the bank won’t give it to you.

“And one of the other things to bear in mind as well, even though they’re pausing, the interest is capitalising onto the loan as well. So you are paying for it, but you just kicking the can further down the road.

“If you can continue to pay, keep paying. Otherwise, if you do need to put on pause, just be aware that there will be additional repayments at the end of the loan.”

If you have any questions about mortgages generally or your specific options, you can email or call Gordon on 0447 905 133. If you’d like to discuss the property market or selling your home, Paula would love to be of further value to you. Email or call 0423 149 477.