And away we go......

Variable rate discounts have started. Leading building society releasing a home loan rate of just 6.85%! Want to know more? Get in touch with us.

Market "volatility" has RBA rethinking rates.

At a function in Sydney yesterday RBA deputy governor Ric Battellino said even though inflation in Australia had started to rise the RBA remained wary of raising interest rates while markets experienced the most volatility since the global financial crisis. Here is a little more of what he said:
"Inflation forecasts for the longer term have risen to be a little above the top end of the target range."
"As you know since then market volatility has become more extreme."
"An important issue ahead of us will be to assess what impact this is likely to have on global and domestic economic activity."
"As yet there is little information on which to base such judgements."

Dr Battellino also took aim at the major Australian banks for raising interest rates above and beyond the RBA's last increase of 25 basis points in November last year.

"Banks responded to the November increase in the cash rate with substantially larger increases -- around 40 basis points -- in interest rates on housing loans," he said. "The size of the increase and the controversy it created seemed to have a noticeable impact on household behaviour."

So what does this mean for you as a mortgage holder? Well, the situation facing the RBA is unique; they have no previous data to refer to so they have no real idea of the impact of the above situations moving forward. The RBA still seems to be carrying some lender "baggage" from November 2010 when the banks raised interest rates higher than the 0.25% the RBA moved and this has changed how you and I behave, with our consumer confidence plummeting and a real shift to saving. Again these are all firsts - something financial markets find unsettling.

Fixed rates are still moving down with some now at 6.34% and they are tipped to move down again later this week.

The most interesting figures we read this week were that the interbank futures market predicts there could be 151 basis points of rate reductions by this time next year. So they are saying that rates in Australia will fall by 1.5% in the next year...WOW. Have to remember that this is a "future prediction" and therefore very volatile however everything is pointing to lower rates with over 60% of economists now predicting that the RBA will lower rates by 0.25% next month. Only time will tell, but for now it's definitely time to sit and wait for at least the RBA meeting next month.

How low can they go?

And the fixed rate "limbo" is under way, which is great news for anyone who wants to fix their mortgage interest rate but not so good for those looking to put money into a fixed term deposit. ING announced 1, 2 and 3 years fixed at 6.39% late yesterday making the other 3 lenders who announced their cuts seem pretty...well, pedestrian. So the big question is how low can they go? Time will tell but it certainly appears that there will be some further rate discounting in the near future. Stay tuned and start stretching- the limbo may prove to be just too tempting!

Wow, what an interesting week it has been (as in ‘may you live in interesting times’).

We have seen huge falls and then huge gains on the stock market, sometimes in the same day, figures released indicating that 1 in 4 households are feeling the mortgage strain, the Reserve Bank of Australia (RBA) revising Australia’s growth predictions down by a massive 1% and for the first time in history the US had its credit rating downgraded. Not to mention Spain, Italy, Portugal – well, the whole EU except for Germany and France. Whew, what a week! However the big question remains “What does this mean for me?”

From a mortgage perspective, we have seen fixed rates steadily coming down over the last 3 months, until late last week when the rush started. There are now fixed rates for 1 year loans starting at 6.59%, 2 and 3 years rates at 6.69% and most if not all lenders have reduced their fixed rates by at least .20%. Westpac’s economist, Bill Evans, has been touting over the last 2 weeks that the RBA would decrease the cash rate by 1% over the next 12 months, only to be howled down by any economist who could get some air time. As it turns out, he looks as though he is closer to being on the money than not.

Uncertainty is the enemy; it leads to rash decisions and wildly fluctuating markets and unnecessary fears which do not help anyone, especially if you have a mortgage.

We want to help you try and put together the best strategy for you and your family moving forward when it comes to dealing with your mortgage. If you are feeling the strain and you are currently paying over 7% then perhaps one of the above mentioned fixed rates could help. As an example, for every $100 000 you have at 7.19% if you took a 1 year fixed rate of 6.59% you would save $40 per month (paying P&I) or $50 per month (paying Interest Only). So if you have a loan of $300 000 you would save at least $120 per month and up to $150 per month. If you want to check out your own situation please visit our website and under “Tools” you will find various calculators that will show exactly what you could save or you can contact us directly and we can provide you with some advice for your own personal situation.

Of course, these rates could continue to fall, as could the variable rate. If in doubt, it would be best to discuss it with us.

Over the next few weeks, if not months, we anticipate that there will be a lot of movement around interest rates; if you wish to keep up to date then may we suggest that you follow our blog.

A week can be a long time....

....especially in economics at present.


Last Tuesday the RBA seriously considered increasing interest rates. Thankfully for those of us not in the only game in town (i.e. mining) they held off. These are the top business headlines one week on:

• Anger Over Credit Rating Resurfaces in Washington
• Markets brace for more economic pain 
• A World of Worries: Markets Fall, New Recession Feared 
• Debt crisis: Silvio Berlusconi unveils reforms to avert Italian crisis
• Painfully won super gains wiped away

Where are all those economists predicting 3 more rate rises this year? Presumably not spending their trading profits on a beach somewhere. Crying into their beers perhaps?

Or are they happy to sit back and count the number of press cuttings they've had recently? (It doesn't matter what you say as long as it makes the media. And scary stories sell more papers.) Oh, no, wait, here they are:

• http://www.theage.com.au/business/double-rate-cut-tipped-for-september-20110808-1ii9g.html

I just wish I'd switched my super into cash a week earlier.