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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Economically they used to say, “when America catches a cold the world catches the flu”.
At the moment because of the literal corona virus in China, the world is at risk of catching the economic flu.
Aside from the presidential election and the post Brexit trade negotiations (both of which are the long game for 2020 -being Nov and Dec respectively), the length of time that the world takes to adjust to the economic impact of the corona virus will be the story of significance in 2020.
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Dear Santa,
I’ve been good all year,
Most of the time,
Once in a while,
Never mind,
I’ll buy my own stuff…
All banks offer spectacular deals to new people.
Then under the cloak of darkness (called “out of cycle” rate rises) – they claw margin back.
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