Business Lending

[nizar]

I would have thought after 300+ basis points cut, the banks would have cut their business lending rates, but NO.

It seems most of them still lend at 8%+

Seems they are just focussing on home loans, which is fair enough considering its a higher volume business and perhaps most importantly, it gets the media coverage and government pressure.

I was considering getting into business and thought that perhaps the business lending and mortagage rates would have maintained their ~1% spread, so I would benefit from a falling cash rate, but seems I was wrong.

Any thoughts?

 

[tech/a]

I would have thought after 300+ basis points cut, the banks would have cut their business lending rates, but NO.

It seems most of them still lend at 8%+

Seems they are just focussing on home loans, which is fair enough considering its a higher volume business and perhaps most importantly, it gets the media coverage and government pressure.

I was considering getting into business and thought that perhaps the business lending and mortagage rates would have maintained their ~1% spread, so I would benefit from a falling cash rate, but seems I was wrong.

Any thoughts?

Take out a line of credit on your house and use it as you wish.

No house?
Then you dont have a great deal of choice.
The banks are taking on more risk and as such you'll be limited in what you can get and at what rate.

Fair enough!

 

[MR.]

Remember on application the bank wouldn't want to be informed as to what that line of credit is going to used for exactly.......

 

[nizar]

Remember on application the bank wouldn't want to be informed as to what that line of credit is going to used for exactly.......

Im not sure what you mean here exactly?

 

[nizar]

Take out a line of credit on your house and use it as you wish.

No house?
Then you dont have a great deal of choice.
The banks are taking on more risk and as such you'll be limited in what you can get and at what rate.

Fair enough!

If you take the option of line of credit on your house do they care what you use the money for?

I have a house -- Actually I don't but my parents are happy for me to use theirs.

Its not a matter of whether or not I could get the loan, I can. Its just at what rate.
I thought it would have been cheaper now than 6 months ago.

And 2% is gonna make a huge difference, hundreds of thousands of dollars over the life of the loan.

 

[Bushman]

If you take the option of line of credit on your house do they care what you use the money for?

I have a house -- Actually I don't but my parents are happy for me to use theirs.

Its not a matter of whether or not I could get the loan, I can. Its just at what rate.
I thought it would have been cheaper now than 6 months ago.

And 2% is gonna make a huge difference, hundreds of thousands of dollars over the life of the loan.

We just took a line of credit out last year with ANZ. From memory you have to stipulate whether the line of credit is for investment purposes. Ours is to renovate the house at some stage so cannot tell you what happens if you say 'yes'.

PS: As I mentioned in that get rich quick thread or whatevere it was, banks have gone feral on commercial and development property. But they will be back once their loan books are re-weighted. Too much dollars to be made. H/E at the moment expect 200-400 bp spread plus a line fee, if anything at all. Just heard yesterday about a bloke in Adelaide who have a Frame development proposal that was 100% pre-committed and his finance was canned! So he had to flip it to an 100% equity vehicle.

They just wont lend to small developers at the moment which will be politically unpalateable as we enter the unemployment phase of this global anxiety attack.

 

[nizar]

H/E at the moment expect 200-400 bp spread plus a line fee, if anything at all.

What do you mean by H/E and the spread?

I was told that "Normally" business lending (variable) rates are about 1% above the mortgage rate which in turn is about 2% above the RBA cash rate.
True story?

 

[tech/a]

2% now and highly likely to be 6 or 8% MORE over a long loan.

If your laoning against your parents equity Id be very cautious.
You dont EVER want to see them in a compromising financial circumstance.

 

[nizar]

2% now and highly likely to be 6 or 8% MORE over a long loan.

If your laoning against your parents equity Id be very cautious.
You dont EVER want to see them in a compromising financial circumstance.

Loan would not be too long around 10 years max.

Yeh i know the thought scares me too.

Im thinking better to just work and wait maybe 4-5 years before getting into so im risking only my own money.
At least this way If it doesn't work out for me, I can always start again, at least only me personally am affected...

 

[Bushman]

Spread is to the 10-year bank bill rate (risk-free rate) so it makes it around 7-8% over a three-to-five year term (on a first mortgage basis).

Home equity will be at the mortage rate.

There are also fees involved.

These are def not normal times so be really conservative IMO.