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Since the launch of new consumer-friendly loans, the spreads on longer-term mortgages on loans with a minimum interest rate of at least 3 years have fallen significantly compared to last year.

For an average home loan, this could save the contractor $ 500,000. The fall in interest spreads also affects the cost disadvantage of floating rate loans, which significantly increases the spread of fixed-rate home loans. In view of the positive developments in the mortgage market, qualified loans have an additional role to play in stimulating growth.


Longer-term home loans and interest rate spreads on variable-rate loans

Longer-term home loans and interest rate spreads on variable-rate loans

In recent years, more analyzes have been carried out on longer-term home loans and interest rate spreads on variable-rate loans. Surveys show that interest margins in this segment are slightly higher, reflecting the lack of competition from banks and the continued growth of more favorable longer-term, more secure loans.

This indicates that significant growth can be expected in household lending, even at longer interest rate mortgages at competitive spreads!

In the following, we look at the evolution of interest margins on longer-term mortgages with a fixed term of at least 3 years since the launch of qualifying consumer-friendly mortgages, including their significant positive effects.

Home loans are also characterized by seasonal fluctuations within a year, sometimes more, sometimes less, in the number and amount of loan applications. Because of this distribution, we need to look at a longer period. The data for a couple of months would be misleading.


Qualified Consumer-friendly Home Loans

Qualified Consumer-friendly Home Loans

Qualified Consumer-friendly Home Loans have been increasing since the launch of their first contracts in June 2017, and since November 2017, there has been a significant uptick in consumer contracting compared to the same period last year in 2016. Thus, the possibility of errors in seasonal periods can be excluded.

In the case of APRs examined between June and November 2017, the average interest rate on long-term housing loans fell by 65 basis points compared to the same period of the previous year and by 60 basis points for the whole of 2016.

Favorable factors can be seen in the second half of 2017 as well, as interest rates have decreased in banks and credit institutions.

Longer-term home loans bring the floating rate interest rate premium up to, or even fall below. Taken together, interest margins show a 30% drop over the same period last year. The cost disadvantage of longer-term loans is declining.

If the interest margin decreases and the interest rate decreases, this gives the policyholder significant savings, while the interest rate and their repayment risk may also decrease.

A $ 10 million home loan, with a 15-year maturity and a 60 basis point decrease, will be $ 560,000 less.

All in all, looking at a longer period with the appearance of a qualifying consumer-friendly loan, comparisons show a decline in interest rates on loans compared to the previous year.

Qualified loan products have brought and are growing both on the demand and the supply side, as consumers are free to choose the most appropriate product from the supply. The interest margins on these products are all below unrated products and are therefore more favorable to customers in any period of 2017.

“Increasing consumer awareness, responsible lender attitudes and informed media outreach can contribute to this,” the expert said.

The rating serves a purpose other than lowering the spreads on longer-term home loans.

Qualified loan properties

Qualified loan properties

  • The uniform conditions,
  • comparability,
  • favorable costs and
  • with customer-friendly service

the program also aims to eliminate variable-rate, riskier home loans. The launch of the Comparison Pages helps to make a good decision, along with the emergence of favorable trends.

If you are interested in home loans, CSOKs, consumer friendly loans, contact our credit brokerage experts who will provide you with free professional mortgage information!

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