Banks and Commentators alike are saying this week; “The next move on rates is UP – You must lock in now!”
What complete twaddle! (Commentators are back at work after the holidays and feel the need to say something to start the year, banks however, are saying things out of complete self-interest).
I only listen to the person with the RED Rate Button on their desk.
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Last year when Covid hit there were predictions of gloom and doom for property – and they were well founded to an extent… BUT… Two things altered the course of events.
On January 1st new legislation for brokers comes into play – it is called Best Interest Duty.
So, how do you actually find a broker who will act in your best interests?
It is a sad comment on an industry of which I have been a part for 23 years, with multiple awards in that time, that a Royal Commission highlighted the need for legislation to compel brokers to do what should be integral to their ethos.
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As of Tuesday, the Reserve Bank Cash Rate is at 0.1%, The Reserve Bank also announced it will buy Australian Govt 3, 5 and 10 year bonds to keep them at their desired target of 0.1%.
So, if banks can be profitable with an interest rate margin of 1.8%-2.2% – then your home loan rate should be 1.9% to 2.3%.
However, with Covid loan losses that banks are having to provision for, it means that we aren’t at these low levels yet – but this is where they are going.
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Yes – you heard that correctly.
Since January this year only Melbourne and Perth house price trends are negative.
Sydney – up 1.8%
Brisbane – up 2.1%
Adelaide – up 3%
Melbourne and Perth have their own temporary Covid issues.
The interest rate on your home loan should now be well into the 2’s – and will head lower in coming months.
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As I suggested back in June, rate reductions are starting to flow through to new borrower deals.
This is good news for my own existing clients because I review;
You will start to see these reductions flowing through to your loan in your next review.
As you know, I seek written agreements with any bank that wants my new business. Namely that they agree to price my existing business in keeping with new offers whenever I make a request.
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This morning as I was sitting down to write on the (immediate and medium) future of interest rates, knowing that they are poised to head down again – two clients of long standing emailed me.
One wrote to me – tongue in cheek;
“I know (how much) you “adore” fixed interest rates, not, but now, locking part or all of a home loan in at these ever so low interest rates needs to be considered?
I still remember the painful 14% home loan interest rates.
Looking forward to your opinion in regard to this matter.”
Surely with rates now under 3%, surely with banks offering fixed rates in the mid 2%’s – SURELY it must now be time to fix … Surely!!
The best time to fix is still never.
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If you’ve saved for a rainy day… It’s raining.
These are the guidelines you should follow for your home loan or your investment loan – if you find yourself in difficulty.
Depending on the level of difficulty you face, these are the steps you should follow… in order;
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Over the last week I have had several clients ask me what I both think and suggest in the current circumstances.
I have been quiet since my email of 6th Feb when I highlighted what the Corona Virus outbreak might mean for the year ahead.
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