If you find yourself asking this question, it’s time to learn the answer.
The lizard brain (quick) answer is: No. Stop listening to the fear tactics of politicians, and start thinking for yourself.
The brain surgeon (long) answer is: Interest rates are set independently by the RBA Board each month in response to economic conditions such as inflation, unemployment rate, global trade, property markets, currency fluctuations, and a crystal ball.
There is a small influence from the government in the fiscal and monetary policy such as stimulus into the economy. i.e. baby bonuses, pensioner handouts, first home owner grants. Generally speaking, we are in a time of political stability and there is not much difference in policy between the two major parties in Australia, and no radical sweeping changes that will change the nation, like a GSTax or floating the dollar.
So, if you were to ask us the question: Will interest rates be higher or lower if this party wins, the simple truth is interest rates will be the same despite who wins next month’s election.
For more info, read this article 21/07/10
Having held off raising interest rates in February, the RBA has, as expected, pushed up the official cash rate by 0.25%.
So far 3 out of 4 major banks have mirrored the Reserve Bank with a 0.25% increase to their standard variable rate. CBA now has a standard variable rate of 6.86%, ANZ 6.91%, and Westpac 7.01%. NAB has yet to confirm an increase.
Try this quick exercise:
Work out your future repayments.
Enter your loan amount and an interest rate of at least 7.5%. Go To Loan Calculator
Make the loan term equal the years remaining on your home loan (so if you have had your loan for five years, change the 30-year term to 25 years).
Is this Comfortable or Scary?
If it looks a bit scary though, it’s time to make some changes.
Know your money habits
You have to first identify your ‘bad’ money habits – the ones that can get you into trouble by overspending. Next, you have to start being strict with yourself on what you can and can’t do.Take action NOW!
Do not wait for rates to become so high you are really starting to stress out – pretend we are in the position now and make adjustments to your life. Your action now will start to safeguard you against the rate rises to come.
You need to be savvy with your money. Do you spend all of your income each month? Is it because it is just there or is it out of necessity? Most of us spend what we earn, no matter how much that is. We often see people with extremely high salaries and no savings – human nature does not seem to change much no matter your financial position. Contact us here for a link if you require one.
It might be time to for a lower interest or a better product to suit your lifestyle. Contact us here. We can help you find out if your current loan is the best for you going forward.
On the day where we all get together and pin our spare change on a horse, the RBA pulls the reins and increases the official cash rate by 0.25%.
The RBA argues that increases are needed to cool the pace of the economy and let some steam out of the housing market, so that inflation stays on course for its target in the years ahead. So who wins when rates go up?
The Winners: Cash holders earning more interest.
The Losers: The Mortgage Belt. It’s another $15 a week on a $300,000 home mortgage.
Ok, I hear you….its not as simple as that. What about the effect this will have on home buyers in the market, what about house prices, the Aussie dollar, exchange rates, inflation, unemployment? How do you really know if you win or lose?
Well, it’s a bit like explaining how $15 a week less in your pocket means you don’t buy your wife a bunch of flowers this week, and whether or not she still makes you breakfast in the morning and how that impacts you getting to work on time, and how your boss frowns when you arrive late, and then he doesn’t give you a pay rise next month, and then you don’t buy your wife flowers again.
In an interconnected economy, it all goes around in circles…just like the runners in the Melbourne Cup.
So put your money in wise investments and make sure you have enough savings to run the RBA interest rate race in the coming year, with more rate rises expected.
P.S. Don’t forget the flowers.
By using rate lock, we just saved a client $27,000 over 5 years!
Interest rates can change dramatically, sometimes in the time from applying for a loan, and actually drawing the loan for a property purchase. Many borrowers are not aware that the fixed rate they see advertised is not the fixed rate they receive on the day of settlement i.e. in 6 weeks time.
A feature called “Rate Lock” is available with most Fixed Rate Loans. For a small fee of 0.15% of the loan amount, you are able to lock in your rate when you apply, and it lasts for up to 90 days allowing you to receive the rate that you were attracted to at the start.
Our most recent client locked in a 5 year fixed rate at 5.89%pa, and the new fixed rate for their loan on the day of settlement was 6.99%pa. That is a saving of 1.1%pa for the next 5 years ($5,500per year) – just by paying a small fee at the start ($750).
Our Plan Assist Mortgage Advisory Team are able to help your clients decide on whether Rate Lock is suitable for them. Call Plan Assist on 02 9449 2333 to discuss this feature and others loan features today.
The RBA has not closed the door on further rate cuts this year, according to the minutes of its Monetary Policy Meetings in June and July.
However, if inflation is heading below the 2 to 3% target, is there any pressure to reduce interest rates? No, and that’s what the money market rates are suggesting for the short term – no movement from the RBA in the next 6mths.
So…rates are staying put.
On the flip side, Chief Economists from two of the major banks last month published their opinion stating the official cash rate will fall by at least another 50 basis points in the coming 6 months. They reckon the threat of high unemployment will spook property investors, and the whole economy will need a boost.
So, according to the bank economists, rates are going down.
It seems no one is sure where short term interest rates are headed right now. Whatever happens, rates are at historical low levels, and if you find a good investment that earns you a good return, talk to Plan Assist on 02 9449 2333 to help consider loan funding at historically low rates.