$70 Off: Cheap Home Loan Plan
The Sun Herald
Saturday June 18, 1994
MORE than three million Australians will have access to housing loans at least 1 per cent below those offered by the major banks by the end of the month.
Several big superannuation funds are set to join the package offered by ACTU-National Mutual Trust.
The ACTU-National Mutual alliance, which provides super-funded home loans, has wooed the giant industry, corporate and public sector funds, and is already receiving about 300 inquiries a day.
On a standard residential loan of $100,000 over 25 years, the 7.75pc rate means a saving of almost $70 on monthly mortgage repayments, compared with current bank rates. However, most banks offer a lower capped rate for the first year.
The trust will be able to offer cheaper home loan rates because it does not have to support a branch network and as such has fewer overheads.
However, major bank executives have warned potential borrowers to be careful when assessing the scheme.
Two financiers are already undercutting the major banks' standard rates for owner-occupied and investment loans by up to 2pc.
RAMS Mortgage is offering a 7.5pc loan with a flat fee of $1,000 but the rate is reviewed every three months.
Heine Management has also joined the push, undercutting the standard bank rate of 8.75pc by 1pc on its variable rate. Although it charges a one-off fee of $1,400, for property investors the rate is almost 2pc below the next cheapest loan.
An estimated three million people could eventually be able to take advantage of the scheme, the source claimed.
The trust is hoping to lend up to $1 billion in its first year and will offer home loans of up to $250,000. For the banks, the sting in the tail is that eligible fund members will be able to refinance their current home loans with the trust.
This could prompt a rush to refinance when rates start to rise from borrowers who could be over-extended, having been seduced by honeymoon loan rates.
One of Australia's most respected economists, Dr Don Stammer of stockbroker Bain & Co, warned home borrowers to expect a jump in interest rates towards December.
"Home borrowers should be expecting an increase in variable interest rates of about 1.5pc over the next year with most of it coming in the first half of 1995," Dr Stammer said.
The trust will be funded initially by a $150 million bond issue to company superannuation funds, the remaining funds raised on the wholesale money markets. Members of funds which invest more than $1 million will be eligible for the cheap housing loans.
"The response has been simply overwhelming," said the scheme's project manager, Anthony Wamsteker.
Australian Bankers Association executive director Alan Cullen said the banks welcomed the competition, but warned borrowers to be careful.
© 1994 The Sun Herald