Hellenic balancing acts and your mortgage

5 years ago, who would have thought that the outcome of a referendum in Greece could have a big impact on your home loan interest rate? It's quite likely that this will be the case. If Greece decides to go it alone and opt out of the euro, the ramifications could well be felt here.

Which way would rates go? Good question - money markets may tighten up again and funding costs increase, pushing up rates OR the global economy could take another hit and the Reserve Bank may decide that, as inflation seems to be under control in Australia, reducing interest rates will stimulate domestic spending. We're leaning towards the latter option as Christmas approaches and retailers are still doing it tough. Job losses aren't the ideal way to start a new year, and cutting interest rates is one sure way to keep shop assistants in their jobs.

What do you think?

Sell, sell, sell!

Have you been offered a home loan with your cheque deposit lately? No? Shouldn't be long now then.....Pre-Christmas sales push linked to staff bonuses

Great offer for property investors

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Getting a depreciation schedule prepared on your investment property can make a big difference to the cost of your investment. Have a chat to your accountant. I bet he or she would recommend a report.

If you would like to know more about the offer, or about Deppro, get in touch with us now and we'll get the information to you straight away.

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The "Blacklist" makes it's public debut.

Today in Melbourne's The Age newspaper the lender's blacklist made it's official media debut! The list is compiled by all major lenders and has apartment projects that the lenders have concerns about. What does this mean for you; it confirms that in ALL circumstances you should have a "Subject to Finance" clause inserted into any Contract of Sale that you may sign. You can read all the details by clicking here.

Also spotted (well, it would have been hard to miss) was a full page ad by CBA advertising that it would match or beat any other MAJOR lenders' interest rate. In a spring marketing gimmick, Commonwealth Bank said that it "guaranteed" it would beat any "currently advertised rate from ANZ, NAB or Westpac".

The pledge excludes "subsidiaries", which rules out a lot of Westpac's offerings through St George, BankSA, Bank of Melbourne, RAMS (and many other lenders) offering more competitive packages than the big 4. It also speaks down to consumers thinking they are unable to grasp the reality that is "not all about rate" - service, extras and convenience play a much bigger role now than ever before.

I can't help but wonder how the CBA can do this. Last year on Melbourne Cup Day they went above the RBA increase stating that "cost of funds" was the reason and, again only last month at the AGM, Mr Norris CEO stated that the "cost of funds" would keep rates up and that a rise outside of an RBA increase could be on the cards. I wonder what's happened? Could it be that the decreasing size of their mortgage portfolio has them scouting for business at any cost?

If you believed that banks didn't want your business, think again. They are at war with each other in mortgage land right now and of course, when at war, the truth is usually the first casualty.

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!