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