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FirstMac fights back with 3.99% fixed rate

By Agnes Gajewska | Friday, 21 November 2008

Armed with the government's $500m RMBS investment and another $100m from institutional investors, FirstMac has taken the fight to major banks with the announcement of a 3.99% fixed rate "FightBack" loan.

The one year fixed rate product, which will revert to the lender's standard variable rate once the 12 months have passed , falls significantly below the current market leader, BankWest's 5.99% one year fixed rate loan.

FirstMac founder and managing director Kim Cannon said the "FightBack" product could potentially take years off customers' home loan repayments .

"Even with the loan rate reverting to the standard variable rate after one year, we still believe that borrowers will be way ahead financially compared to current comparable bank loans," he said.

He went on to say that the product was a direct result of the Federal Government's $8bn investment in RMBS, of which FirstMac was the first to receive a $500m issue.

He said non-bank lenders had taken "a bit of a battering from the big banks in recent times" and would now be able to retaliate.

"We believe this will also reinvigorate the lending and property market which is exactly what we need right now," he added.

FirstMac and Members Equity first to get RMBS boost

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Fool's comment	Fool \| 21/11/2008

Disgusting to say the least. Have we learned nothing from the what happened in the US
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James's comment	James \| 21/11/2008

obviousily the first comment on this is by someone who has no idea. That is the interest rate that the client is being charged at NOT the rate they are being qualifed at. No wonder our industry needs regulation to get rid of people who do not understand the system. i do not hav accrediation with firstmac but as long as clients are informed of the whole package this is a great win for the every day people. also i do not think rates will get this low but it may give you a idea of how far it may come down in the short term.
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This just makes me angry	GerMonkey \| 21/11/2008

if a company needs the help of tax dollars then they should not be able to take this to market and create more dodgy loans.
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Subprime Australia	Subprime Australia \| 21/11/2008

Here comes Australia's next avalanche of subprime loans all paid for by the Australian taxpayer.
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ARM's comment	ARM \| 22/11/2008

James, do you realize the mess that ARM's in the US have caused? Well, this is the same cr@p. At the end of the year, the rate reverts to the LENDER'S variable rate, NOT the official interest rate as set by the RBA. The lender's variable rate will be whatever the heck they want it to be, so your comment about rates not getting this low is totally unfounded - unless you are an 'insider' that's been fed propaganda...
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Why all the negativity?	Thomas \| 23/11/2008

I don't understand all the negativity from ARM and Subprime. It's shortsighted and with all due respect, ignorant. This product offers a real opportunity for brokers to write business away from the majors and generate real competition again. Would all you nay sayers rather keep setting 90%+ of your business with the big four? How long do you think it will be before the majority of non bank lenders are gone, and you'll be lucky to be getting a flat rate introducers fee and no trail from the big boys? To ARM and Subprime, this product is nothing like an adjustable rate subprime loan like was sold in the US. Firstly, it's a FullDoc loan, and more importantly its securitised ( threfore insured) and it's capped at 80%.Where's your case for all the moaning???? You can be sure the other broker your customer will be talking to will be looking at this deal even if you wont be. You either want non banks innovating or you dont. Otherwise, sell your book now cos it will be worth very little when the non banks are gone and the majors own the lot.
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James's comment	James \| 23/11/2008

thanks for Thomas comments - the other comments do not understand loans - let me guess new to the industry. The big banks (also RAMS and Bankwest) have honeymoon,guaranteed rates - usually at a low rate for one year and then they jump to the SVR - lenders have been doing it for years and know one seems to mind those loans. Like i said i actually do not deal with Firstmac but any one who shakes things up at the moment has to be appreciated (i actually do do about 80% of my business with the big 4).
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Thomas's comment	Thomas \| 24/11/2008

You are spot on, James. Plenty of other lenders do this already, but this has trumped them all. The people on here complaining have just not crunched the numbers and they have ignored the 80% Full Doc requirements of this loan. It just isn't anything like an American, no recourse, NINJA/subprime loan. I did some quick calculations on a 400K loan and this product beats a pro pack for about 7 or 8 years. The savings in the first year are massive. Imagine how much a customer will save if they repaid it as though it was 7% or 7.1%, etc ( pro pack rates).... don't forget this has a 100% offset with a VISA debit card, so the way I see it, there are no repayment restrictions. Customers can pay a huge amount of extra principal in the first year. None of the current 1 year fixed rates offer an offset account, or allow this. Do the maths...its an absolutely amazing deal! How can a broker NOT put this in front of a customer?? Also not sure whether anyone noticed but there is a second option with this product- a straightforward 6.99% variable, also with 100% Offset/VISA etc, which means it's also a pro pack beater. If the guys on here, or other brokers feel uncomfortable selling the 3.99% with the loan reverting to SVR after yr 1, they should have a close look at the 6.99% variable product instead. Either way, we all have to support the non banks where we can or it will be curtains for all of us within a year or two... these guys are kidding themselves if they think otherwise. The banks never dealt with brokers before securitised lenders came into the market here. Such short memories. Without the FirstMac's and Resi's and Challengers, the banks would have no need for brokers. If you don't think that's true, wait and see how the majors start buying up the tier 2 lenders like Suncorp and ING and Bendigo/Adelaide and Bankwest (oh wait, they already did that!!!- not to mention Aussie) Besides, I don't see any of the other basics or pro packs below 7%.. at least not with offset and unlimited free redraw etc...and both the fixed rate and the variable rate have comparison rates around 7%, so either way they are pretty much the best featured, no fee, offset loans on the market now. There are just no excuses for fellow brokers not supporting this product.
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ARM's comment	ARM \| 24/11/2008

Have you considered pulling your head out of the sand and seeing what all this (your industry) is doing to everyone??? It's not all about having a good book. Crunch all the numbers you like - obviously in uni (or the 2 week broker course) they didn't teach you about the all too real effects that numbers on spreadsheets can have on flesh and blood human beings in the real world... Or is that the problem? Maybe you guys are looking at all this from a greedy broker's perspective, and not from a human being's perspective. Read some articles on recent history and see the role that these sort of 'products' had - and are continuing to have - in the collapse of everything that you're seeing now. BTW, many of us do understand loans. Loan = subservience!
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Thomas's comment	Thomas \| 24/11/2008

ARM... you're pushing an emotional argument rather than a substantive, factual argument. Your tone implies that you believe that somehow this product allows customers to borrow more than any other lenders products, and that it is somehow more dangerous as a consequence; that somehow this loan is similar to subprime or worse. Is that the point of your concern? Let me give you some peace of mind, because quite the opposite is true. Truly. I'm sure you are an educated person, but for the point of this exercise,here is why; This loan is full doc only, and limited to 80% LVR. It is NOT available to 100-120%LVR, and it's not a No Doc/NINJA (No Income, No Job or Assets)loan. Furthermore, FirstMac is a securitised lender, meaning this loan is fully insured even at 80% or below. Again, NOT at all like Subprime and NOT remotely similar to the NINJA products sold in the USA. And finally, but critically, as securitised products the serviceability is governed by mortgage insurers calculators, which anyone in lending can confirm are inherently less generous than bank calculators. So in fact, one could argue that borrowing capacity will be less on this product than on all bank products in the market. That being the case, where is your argument? Customers accessing this loan will quite simply not be able to get as much money as they can get elsewhere. They will also need to pass not only the lenders credit guidelines, but also the insurers. This will mean its a more difficult loan to obtain than just about any banks loans. Again, where is your argument? I just cant see the validity of your concerns. This will be a loan available to only the strongest candidates, who will be fully insured and geared to a maximum of 80%. We can debate this all day, but you're just wrong I'm afraid. If you don't enjoy debt, or dont believe that people should have any, that's your prerogative of course, but if thats the case I have to wonder why you are in this industry, and if so you may be debating this in the wrong place with the wrong audience. Its your right to have opinions and concerns, but it would be better if they were more considered.
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Thomas's comment	Thomas \| 24/11/2008

Just some quick figures for you ARM...
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Thomas's comment	Thomas \| 24/11/2008

Just some quick figures for you ARM... on a 300K loan and 5 years repayments FMAC - principle reduced by 12420. STG Basic - reduced by 7260 CBA MAV- reduced by 6885
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Seriously...Thomas or should I say some looser who may work for First Mac	Jenny \| 24/11/2008

You all really need to get your hand off the major ego between your legs.
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ARM's comment	ARM \| 26/11/2008

What's the 'lender's standard variable rate' likely to be once the loan resets? Anywhere near the official interest rate? I think not. Are the customers told this clearly? I mean verbally, in addition to the very fine print? Once again, see what the situation is in the good ole US of A - the land of dreams and opportunity - for some ideas on this. BTW, Thomas, I do appreciate you explaining the details to me and for the record, I'm not 'educated' in the normal sense of the word - just finished secondary school, actually. Emotional argument? Maybe - probably. But, uh, we are humans and we have emotions - or are brokers exempt?!
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Thomas's comment	Thomas \| 26/11/2008

ARM, great that you are honest and concede that you aren't speaking from a position of experience or authority. Please don't misunderstand me- I understand how your perception of these sorts of loans can be misshaped; its simply that it is exactly that, misshaped and unfortunately incorrect. I guess all you can do is take me, or other more experienced and knowledgeable brokers at our word that these are not even close to the same subprime loans you are rightly critical of. We just dont do that sort of thing here. Our regulators, insurers and lenders exercise far more conservative policies and controls. To answer you, the standard rate is tied to the RBA cash rate. If ou are suggesting that lenders will "hike up" their rates after a year, I'd find that pretty unlikely. Lenders dont make any friends that way, and can destroy their brand overnight if they do that. As for whether brokers have a heart, that's not an argument I want to enter into, except to say that I would defend brokers rigorously. My experience has been that an enormous and overwhelming majority of brokers put the needs of their customers at the absolute forefront of their thoughts. We don't have a business or an industry without customers. Its really quite stupid to rip them off!
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Have a look at this	Rory \| 08/12/2008

Hi guys. My wife & I have been together for 10 years and both from previous marriages where we owned homes and both lost out in the bust up. Me (male) still paying maintainence. We rent. We want to buy. We dont have a deposit. We have helped some family out, much to my disgust now, but thats life. Have a look at the figures below, which are real and after tax dollars in our hand. Me: Annunity Pension for life per fortnight $2200 New Job $1300 per fortnight Wife: $2000 Maintance: 300 per fortnight Rent current 560 Owe: 25,000 @ 2.9% In about 12 years I will collec