It's here at last!

At some times this year, it seemed like it would go on for ever. But here we are at last. And thank goodness.....

Thanks for following us through the year and we look forward to bringing you more news you may not have heard elsewhere, or at least our spin on it, again in 2012.

Wishing you all an excellent Christmas and fabulous New Year. Stay safe and enjoy.

ANZ and the 2nd Friday of each month.

You may have recently heard that ANZ has made a change to when they will review their current home loan interest rates. Commencing on the 2^nd Friday of January 2012 and then on the 2^nd Friday of every month following ANZ will announce any changes in their interest rates.

While this is a change from the current practice announcing rate movements shortly after the Reserve Bank of Australia (RBA), at this stage we don’t believe it should be anything to worry about.

What does this mean for me if I have an ANZ Loan?

In the short term, not much. It adds some certainty, in that you will know exactly when ANZ will announce any changes to your interest rate. However, it will now allow them to move rates outside of RBA announcements. Whilst all lenders have always had this option available to them, until now not one of them has ever done it.

Is it good or bad for me?

It is too early to tell at this stage. Over the last 4 years we have seen quite a few changes with the four major banks now all having different standard variable interest rates which, of course, came about because, in some cases, the full RBA rate decreases were not passed on. ANZ have always been a competitive lender and we’re sure they will continue to be in the future.

Then why did they do this?

One of the main reasons was to uncouple the interest rate movements from the RBA announcements. No doubt they, like most lenders, found the pressure from politicians, the media and the public (especially via social media) “annoying”, for want of a better word. Now on the 2^nd Friday of each month they can quietly (or very, very quietly when rates go up) put their decision up on anz.com which will attract less attention.

OK, so that may be a little light hearted; the other major reason for the change is due to the varying funding costs. The overseas markets, where Australian lenders often borrow money long term to lend to you and I, are closed at the moment and everyone anticipates that when they open back up costs to borrow from these funds will have increased in a very similar fashion to what we saw at the start of the GFC. Until Europe and the Euro settle down these markets will continue to be volatile. By reviewing their rates monthly, ANZ will be able to move rates outside of the RBA announcements and with, perhaps, less scrutiny.

Hold on - the RBA meets on the 1^st Tuesday. ANZ doesn’t announce their rate changes until the 2^nd Friday;  that’s 1,2,3….10 days later!

That is sure to be a good part of the reason for the change. Yes, if rates go down then it is 10 days before you know what ANZ will do and then possibly another 7 days before any changes come into effect. But what about the reverse situation? When rates start going up, you should have all those extra days at the cheaper rate. This is, for us, the most important question. Only time will tell if the increases follow in the same time frame as the decreases. We will be watching this with great interest.

Will other lenders follow?

Not sure at this stage but our gut feeling is that other lenders will wait and see. The RBA doesn’t meet in January and ANZ will make an announcement on the 13^th so it will be interesting to see what happens especially if they move rates up!

We do believe that the general trend for interest rates right now is downwards, however it’s likely that many lenders will not pass on the full RBA rate decreases in the future so the major banks will continue to have differing standard variable interest rates. All this makes it harder for the general public to be able to compare loans between lenders all the more reason to ensure you have a Licensed Mortgage Broker working for you.

As always if you have any questions or concerns contact us, we are always here to help.

This will be our last update for 2011, unless something dramatic happens, so I would like to take this opportunity to wish you all a safe and happy holiday period. We all look forward to assisting you in 2012.

Robert Seton

Managing Director

PS: We have attached the ANZ press release for those of you who maybe interested. Click here.

Early Xmas present - Rates cut

http://www.abc.net.au/news

Illegal bank fees?

A class action brought by 34000 customers of ANZ has been given the green light to proceed to further hearings. It's only a partial win by these customers however gives comfort to customers of other banks. If the courts rule that ANZ's fees for late payments, amongst others, are indeed illegal, we can bet that the other banks will scramble to refund customers before a similar class action is brought against them.

Your bank giving YOU money: priceless!

We're not alone...

and we're not talking about ET.

We've thought for a while that interest rates in Oz had gone as high as they were likely to in this cycle. We figured there'd be a rate cut in November and would not be surprised to see another one or two by Easter. It seems some economists are coming around to the same way of thinking.

Westpac and JPMorgan have predicted more rate cuts than this. Of course, there will be PR departments for both intent on gaining exposure which relies on dramatic headlines. We're more pragmatic.

It's always nice to have others agree with you.

I'm now predicting a Sydney Swans premiership in 2012. Anyone care to join in?

Interest rates plummet

Someone can see the writing on the wall. Actually, it seems everyone can. Fixed rates continue to fall with the latest offering 5.99% fixed for 2 or 3 years. What does that say about variable rate expectations? As always, talk to your broker before fixing and remember you don't have to fix your whole loan.

And a new bank rides into town from 1st Dec - Heritage Bank. Until now a building society based in Toowoomba, Heritage is the latest entity to be given a banking licence. Now if they would only open some branches in Victoria......

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?