On rates – an update on my February comments

June 18, 2021

Banks and Commentators alike are saying again; “The next move on rates is UP – You must lock in now!”

What complete twaddle! (Commentators are still feeling the need to say something to fill editorial space, and banks are still saying things out of complete self-interest).

I only listen to the person with the RED Rate Button on their desk.

That person is the Chair of The Reserve Bank.

In this current month’s Reserve Bank Minutes – where rates were left on hold, the Governor committed AGAIN to the following…

  • “I will not be moving rates until Inflation and Wages Growth are FIRMLY in the 2-3% band”
  • “That will NOT be until AT LEAST 2024” !!
  • (Unorthodox Policy Here to Stay : RBA : The Australian Wed Jun 16th)

Now to the money market facts behind this:

Since the start of the year the Australian 3-year Bond Rate HAS crept up from 0.12% to 0.37%, but the 1-year Bond Rate is STILL at 0.12%

This is why 3-year fixed rates have risen.

The Reserve Bank Governor stated that he will review the policy of purchasing Aust Govt Bonds in order to keep the bond rate at 0.1% in July – so I will watch that review carefully.

What does this mean – and what should you do?

3-year fixed rates have risen to 2.2% – 2.3% but the pressure created (by competition) on Variable rates is still DOWN.

We are however returning to a more “normal” environment where the 3-year Fixed Rate does indicate where variable rates are headed.

The best approach to your home loan rate is always to choose a variable rate from a bank who has a written agreement with me to reprice my clients’ existing loans back to their new client offer.  This is as certain as you need things to be.

I review every loan, every client, every 6 months and reduce their rate accordingly.

I refuse to use banks who will not agree to this.

It was ASIC who said “…any consumer who deals with a bank who price gouges their own clients is foolish.”

Banks behave terribly on rate towards their own customers – we know that – they favour profit and shareholders.

Your response is as it always has been, choose a bank that has a fair repricing agreement with me and reap all the benefits of variable.

With my suggested approach when variable rates do eventually move up, your own loan will be starting from a much lower base than otherwise.  

Ask Alan

How to choose the right lender – inside information from a mortgage broker

June 2, 2021

Amidst surging interest in property, there are record enquiries for loans.

The Reserve Bank reiterates again that it will not be raising the cash rate until unemployment has a 4.x% on it and inflation has a 2.x% on it. (The Australian Sat 8th May)

The Government initiative HomeBuilder is an incredible success but is driving up the cost of materials and labour by up to 30%. (The Australian 9th May)

Demand for existing houses – including in the regions (such as the Gold Coast) is pushing up house price by similar amounts. (The Australian 9th May)

How do you choose the right lender and not make an expensive mistake?

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Investing in Property: What this property boom really teaches us…

March 8, 2021

Not long ago, regulators’ forced banks to cut back on investment loans. That period has passed, and this presents a new opportunity for investors.

If you are 30 and buying for the first time, if you are 40 and shifting house, if you are 50 and know you need to invest – there are two typical responses in these times that I shall call a “property boom”.

  • “I need to buy now, or I’ll miss out” – FOMO
  • “The market is crazy; I’ll wait until it crashes” – It never does.

Hidden in current headlines is “Feb 2021 – largest rise in house price in 20 years.”

In other words, this has happened before and will happen again.

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Rates in 2021

February 3, 2021

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.

That person is the Chair of The Reserve Bank.

In Yesterday’s Minutes – where rates were left on hold, he SAID…

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Property Bloodbath…Journalists do love a headline…

February 3, 2021

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.

  • The Government intervened with Jobkeeper to cushion the blow of Covid Lockdowns.
  • The Reserve Bank intervened by dramatically cutting Interest Rates and stating that they will stay low until at least 2023.

I have heard so many predictions of property falling into the abyss over the years.

Just to name a few:

House price collapse: 25 Jan 2014

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Best Interest Duty

December 10, 2020

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.

In general, people act out of self-interest and there is nothing wrong with that.

If I did not get paid, I would not be a broker.

The problem is not self-interest, but that when conflict arises between a client’s best interests and the broker’s, that a broker may act by putting their own needs above the clients.

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Rates – Where to?

November 5, 2020

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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House Price Leads the Way to Recovery

November 4, 2020

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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Further Rate Reductions on the Way

August 20, 2020

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;

  • Every loan
  • Every Client
  • Every 6 months
  • And where a reduction is possible seek that on your behalf

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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So Where Are Rates Headed?

June 9, 2020

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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