Saturday, August 20, 2011

Fixed Mortgage Interest Rates Falling.

With all the turmoil in the world share markets in recent weeks, and real concerns over many countries sovereign debt, fixed mortgage interest rates have started to fall with some banks and lenders. In many cases a 3 year fixed rate home loan is a fair bit cheaper than the discounted variable rate mortgages the banks and lenders are offering.

There is even talk of the Reserve Bank Of Australia possibly dropping the official cash rate, which currently stands at 4.75%. Let’s hope if this happens, the banks and lenders pass on the full rate cut the RBA might pass (there may be a few rate cuts, if the world economies cant get there debt levels under control). There are certainly some genuine concerns about some of the biggest economies in the world at the moment. Australia though, at this stage, is in a good position fiscally, with our banks very healthy, and the demand for our resources still remaining strong.

In the past couple of years, generally speaking the banks and lender’s haven’t passed the full rate cut at times, they have increased there margins, stating that whole sale funding costs have increased. A lot of our banks and lenders in Australia borrow money from overseas to fund mortgages, and since the global financial crisis, there has been more reluctance from banks to lend to one another, hence the higher costs of borrowing (a basic explanation).

Now with fixed rates falling, and in some cases cheaper than the discounted variable rate, should you fix your home loan?

It may be a good time to consider fixing your home loan, or fixing part of your home loan. There are pro’s and con’s to fixing your mortgage.

Some of the pro’s are –

•You might have a cheaper interest rate than your variable loan
•You know that at least for the fixed interest rate period, how much your repayments are
Some of the con’s are –

•If the reserve bank does drop rates, you maybe paying more with your fixed rate home loan
•Generally most banks only allow a certain amount extra to be paid off with a fixed rate mortgage, if you pay more than what your lender allows, you may get charged extra fees
•You may not be able to have an offset account with a fixed rate home loan.
•Exit fees can be very high, if you pay off your fixed rate home loan, before the end your fixed rate period.
There are 2 very good articles I have written, in terms of fixed rate mortgages. They are worth a read, to learn more able the pro’s and con’s of a fixed rate mortgage –

1.What are the exit fees on a fixed rate mortgage?
2.Fixed rate home loans.
Have a read of these articles, and think what maybe better for your personal financial situation. A talk to a qualified mortgage broker, is a good place to start too, to help decide what is best for your personal needs.

If you have any questions or comments, please leave below. If you would like more personal mortgage information, please contact me anytime.

Tuesday, August 2, 2011

The RBA Keeps Interest Rates On hold.

The RBA Keeps Interest Rates On hold?

Some great news for mortgage holders today, as The Reserve Bank of Australia kept the official cash rate on hold, at 4.75%. There had been high speculation that the RBA may increase the official cash rate today, but thankfully mortgage holders have been spared a rate rise.

There is still an expectation that the RBA may increase the cash rate in the coming months, but they look like they are taking a wait and see approach, as there is still a fair bit of uncertainty with both European and American public finances.

Credit growth in Australia has declined in recent months, and low by historical standards. House prices too, have also softened over recent months, and with a few other factors, may have helped the RBA decide to keep rates on hold. I personally think this is a great decision for us all.

The official statement from Glenn Stevens, Governor: Monetary Policy Decision: -

Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.

The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries both contributed to the slowing. It is still not clear how persistent this slower growth will be. The supply-chain disruptions are now gradually abating and commodity prices have softened of late, though they generally remain high. In China most indications suggest only a mild slowdown so far.

The central scenario for the world economy over the next couple of years envisaged by most forecasters remains one of growth below the pace of 2010, but at or above long-term averages. Downside risks have increased, however, as concerns have grown over the outlook for the public finances of both Europe and the United States.

Australia's terms of trade are now at very high levels and national income has been growing strongly. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. But in other sectors, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended.

The resumption of coal production continues, but a full recovery of flood-affected production now looks unlikely before early next year. Precautionary behaviour by households also looks likely to keep some areas of demand weaker in the near term than earlier expected. Overall, growth in real GDP through 2011 is now likely to be at about trend. Over the medium term, overall growth is still likely to be at trend or higher, unless the world economy deteriorates noticeably.

Growth in employment has moderated and the unemployment rate has been little changed, near 5 per cent, for some time now. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn, though productivity growth remains weak.

Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year. As these effects reverse over the next couple of quarters, CPI inflation should decline. But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years. While they have, to date, remained consistent with the 2–3 per cent target on a year-ended basis, the Board remains concerned about the medium-term outlook for inflation.

It is appropriate under such circumstances for monetary policy to exert a degree of restraint. Most financial indicators suggest that it has been doing so, as a result of the Board's decisions last year. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened over recent months. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.

At today's meeting, the Board considered whether the recent information warranted further policy tightening. On balance, the Board judged that it was prudent to maintain the current setting of monetary policy, particularly in view of the acute sense of uncertainty in global financial markets over recent weeks. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

If you have any questions or comments, please leave below. If you would like to contact a mortgage broker, please contact me anytime. I work the Perth metro area.