Monday Market Update - COVID-19: Bank and Government Initiatives

Good Morning
 
I hope you had a good weekend self isolating and working out this new environment we are in. It brings up some challenging times in how we evolve, interact and manage our clients and their expectations.
 
From our perspective it is business as usual, however we will be seeing all clients via Skype and phone meetings. Our processes are all internet based from collating documentation to loan application as well as liaising with solicitors, agents and all those in the loan process. If you have any questions around our process during this period please feel free to give me a call.
 
Interest Rate Cuts and COVID-19 Support
 
Thursday saw the RBA drop rates by another 25 basis points to a record low. The interesting response as I mentioned would be whether the banks passed this rate cut onto its Residential and Business customers.
 
Most lenders have not passed this on but have offered a raft of initiatives to help clients being affected by the COVID-19 pandemic and its effects on local and global economies. At the time of writing ANZ is the only lender that will be reducing its variable rate by 0.15%
 
National Australia Bank, Westpac and ANZ said on Friday that affected home owners could pause repayments for up to six months, pending a three-month review. Banks do offer a 3 month freeze at present, however this is only due to financial hardship and requires certain qualifications. Commonwealth Bank and other lenders should be announcing their rate moves or initiatives over the coming days. CBA has announced some new loan benefits for small businesses for new funding.
 
Pausing repayments would give a home owner with a $400,000 mortgage access to an additional $11,006 over six months, or $1834 per month, according to NAB.
 
This is a deferred payment and will be added to the clients loan after the period. One strategy that we have always been keen to implement for clients is the disciplined use of an offset account. We hope the focus on building up cash reserves in the offset (while reducing interest paid on the loan) will help them through this tough and changing period in 2020.
 
We will be sending another update this week as we see changes in the market to be quite fluid this week. Please feel free to contact me should you have any questions.
 
Take care and look forward to talking with you soon.