Will the Euro debt crisis get better or will it get worse? The answer to that question seems to change daily (if not hourly) at the moment. “What’s any of this global debt crisis stuff got to do with me?” you might be asking. Well, if you’re thinking about applying for a loan, don’t think about it for too long.
Aussie banks keep saying they’re “safe” from the crisis and don’t have any “exposure” to the bad European debts but can you rely on their word? Remember back to 2007 when global money markets froze and the government had to introduce measures to ensure the banks could keep lending to business and consumers.
Well that could happen again. There have been a few discreet stories in the mainstream media in recent days about how the banks will have to go back to the international money marketplace next March to renew some of their lines of credit. That’s how they “buy” the money needed to issue home and personal loan and other types of credit.
In recent years our banks have been “funding” their loans more from the deposits we keep in our accounts than they used to. That’s why savings rates have been relatively high but that doesn’t give them enough to keep granting high volumes of loans. They need to go to the international money market to fill the gap.
If our banks can’t renew their international funding arrangements at favourable rates, they may be forced to “tighten” their lending requirements and that will make it more difficult to get a loan.
It’s already taking longer for lenders to process applications than it did a few years ago and borrowers are expected to jump through many more hoops so consider not waiting until the March ‘crunch’.
What can you do?
If you need a new home loan, talk to a broker sooner rather than later. There are some excellent deals around right now, both fixed and variable and rates may even go down again early next year. Property prices are also low so it’s a great time to buy.
Make sure your financial affairs are in order. Make sure there are no black marks on your credit file. Have records of income and expenditure before you submit an application and have a reasonable idea of the loan size you can afford to service.
If you need a personal loan, apply as soon as you can. Borrow the smallest amount you need to and do your best to get approval for an unsecured loan. Consider taking a fixed rate so you can have certainty that you will have the loan repaid in full over the loan period. A fully paid personal loan is a good way to establish a health credit rating in the future.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan