Rate increase of > 0.25%

Viewing 5 posts - 1 through 5 (of 5 total)

erikdaphne
Member
@erikdaphne
Join Date: 2005
Post Count: 6
August 20, 2006 - 7:36 am
Hi, still finding my feet…
Our lender informed us that they will increase our loans by 0.35%, not 0.25% [grrr]. Thinking this was a mistake, we called them, only to hear “we’re allowed to do this”, without further explanation.
Clearly they know we have a high DEF (4%) and seemingly stuck with them for now.
Not sure what other lenders are doing but is there anything we can do against these “stand over tactics”?
Thanks all.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
August 20, 2006 - 8:34 am
Hi erikdaphne
Yes i guess one thing you have to firstly understand is that there is no correlation between the variable rate your lender charges and the ARB Cash Rate benchmark which has recently gone up by 25 basis points.
Whilst, it is common for a lender to pass on the full 0.25% rise it is not a requirement and many lenders try and hold on as long as possible to attract market share. Others are often the first to put the rate up and then often by more than the 0.25% increase in the Cash Rate.
With a large DEF of 4% you do not have much choice but stay put although for your next deal i would be making sure your broker gives you every option and explaisn to you the full reasons why he / she is recommending a particular lender.
Cheers
Richard Taylor
Residential & Commercial Finance Broker
100% Finance on selected properties in the USA.
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erikdaphne
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@erikdaphne
Join Date: 2005
Post Count: 6
August 22, 2006 - 12:20 am
Thanks Richard for your insights!
Erik
DraconisV
Participant
@draconisv
Join Date: 2006
Post Count: 319
August 22, 2006 - 3:11 am
Originally posted by Qlds007:
With a large DEF of 4% you do not have much choice but stay put
Whats a DEF, why is 4% high. Can someone please give me a tutorial on this.
Christopher.
Richard Taylor
Participant
@qlds007
Join Date: 2003
Post Count: 12,024
August 22, 2006 - 3:21 am
DEF – Deferred Establishment Fee
It is another name for a early repayment penalty. Instead of charging you up front we will charge it later on down the track unless you keep your loan with us for a specified period of time.
For the records 4% is not considered over the top high in the world of lending.
Cheers
Richard Taylor
Residential & Commercial Finance Broker
100% Finance on selected properties in the USA.
Email us to be added to our mailing list.
[email protected]
Ph: 07-3720 1888
Richard Taylor | Australia's leading private lender