Mortgage Simplicity

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.