RBA’s April 2022 decision

The RBA opted to hold the official cash rate at 0.1% at today’s monthly meeting, which came as little surprise as Australia waits for an election to be called.

However, the central bank boss again flagged that changing economic conditions could see an interest rate hike in the near future.

“Inflation has increased sharply in many parts of the world. Ongoing supply-side problems, Russia’s invasion of Ukraine and strong demand as economies recover from the pandemic are all contributing to the upward pressure on prices,” RBA governor Philip Lowe said in his statement. “In response, bond yields have risen and expectations of future policy interest rates have increased.”

Lowe noted that the Australian economy is continuing to perform well, with household and business balance sheets in good shape, an increase in business investment and a large amount of construction work in the pipeline, while national income is being boosted by higher commodity prices.

But he did concede that rising prices and hardships from natural disasters such as the recent floods are putting pressure on household budgets.

Unemployment falls again

Another improvement to the unemployment rate had it sitting at 4% at the end of February, while underemployment was also at a new low.

“The RBA’s central forecast is for the unemployment rate to fall below 4% this year and remain below 4% next year,” Lowe said. “Wages growth has picked up, but, at the aggregate level, is only around the relatively low rates prevailing before the pandemic.”

On inflation

Lowe noted that while inflation has increased in Australia, it is at 2.6% in underlying terms, despite being 3.5% in headline terms.

This meant we were lower in inflation terms than many other countries, but “higher prices for petrol and other commodities will result in a further lift in inflation over coming quarters, with an updated set of forecasts to be published in May”.

So will the RBA raise rates?

Lowe reaffirmed that RBA policy was to wait for evidence that inflation is sustainably within the 2 to 3% target range before increasing rates.

“Inflation has picked up and a further increase is expected, but growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target,” he said, adding that the board would continue to monitor various conditions in coming months.

And the observers say?

A Finder survey of 34 economists and financial experts found that while none were expecting a rate rise today, a significant 88 per cent expected the RBA to hike this year, with some forecasting the first movement as early as June.

AMP economist Shane Oliver said the conditions were right for a rate rise in the coming months.

“The RBA’s objective of full employment has been reached,” Mr Oliver said.

“Wages growth is picking up and inflation is pushing well above target with a rising risk that inflation expectations will start to rise, in which case it will become self-feeding, and the Budget will add in more stimulus this year. So the conditions for a rate hike will be in place by June.”

But Leanne Pilkington of Laing+Simmons said there was “a case to be made” for the RBA to keep rates on hold “given the delicate cost of living factors and global uncertainty.”

Aussies ready to tighten belts

 A separate survey by Canstar found that 56% of Australians were worried about being able to pay their bills if the RBA did raise rates in an environment of skyrocketing costs. Many of the survey respondents said their mortgages were their biggest concern, ahead of rising rents and petrol prices.

Canstar’s Steve Mickenbecker said a cash rate rise would make the situation much worse for a lot of Australians.

Costs keep rising for households with petrol prices reaching an eight-year high and supermarket shoppers reporting higher grocery bills, but the sting is about to get worse for some,” he said.

“Anyone with a mortgage will likely feel financial pain when the Reserve Bank raises the cash rate this year as predicted by some of the major banks.”

 

 

Please visit the following sites for more information:

Statement by Philip Lowe, Governor: Monetary Policy Decision – 5 April 2022

 

The lending year that was in 2021

The Lending Year That Was In 2021

The lending year that was in 2021

2021 was another crazy year in every sense of the word. Of course there was the pandemic, which put a stamp on us all for the second year running, with the Delta variant first becoming the dominant strain of Covid, followed by Omicron at the end of the year.

But economically speaking, it has been a year of trade sanctions and stand-offs, political uncertainty, continuing rock bottom interest rates and, importantly, the first shoots of inflation beginning to be apparent.

The lending space was especially marked by uncertainty. Here are some key moments in lending that marked 2021.

Fixed rate rises

Early in the year, it seemed as if the banks were racing towards negative interest rates in their bid to attract customers. Variable loan percentages beginning with a ‘1’ were beginning to seem common, while attractive fixed rates tempted borrowers into locking in loans for three to five years.

On top of this, a number of lenders were offering cashback deals for customers to switch from another bank via a refinance.

Then, around the end of the March quarter, talk began to emerge about future rate rises. The RBA had committed to keeping rates on hold until 2024, but economists and the media began to apply pressure, suggesting the central bank must move earlier than that.

Around this time, lenders began to increase the interest rates on their long term fixed rate loan products, mostly for four and five-year terms. Throughout the year, the trend gathered pace and by the end of 2021, lenders were hiking fixed rates repeatedly, even on one, two and three-year products. Some big four banks were increasing rates more than once a month.

Variable rates, however, continued to come down as the fight for customers continued. It will be interesting to see what transpires in this space in 2022, though you can only assume lenders will increase rates wherever they are able.

Family home guarantee

The Federal government introduced 2% deposit home loans for single parents in a bid to help them provide a home for their dependants.

With saving for a deposit a major hurdle, the family home guarantee saw 10,000 spaces made available over the next four financial years, beginning on July 1. Those eligible could obtain a home loan from one of 27 participating lenders, with a deposit of just 2% of the property’s value. The government would then guarantee the other 18% of the deposit so that the borrower would not be subject to lenders mortgage insurance (LMI).

APRA intervenes

The RBA has repeatedly stated that it would not seek to control the nation’s housing markets through decisions made at its monthly meetings. However, the Australian Prudential Regulation Authority (APRA), has been known to step in when it deems values to be headed towards bubble territory.

And in October, APRA did just that, instructing banks to now assess a borrower’s serviceability, using a mortgage repayment buffer of 3% rather than 2.5%. Basically, this means that formerly, when you applied for a loan, a lender would need to assess that you could handle a 2.5% increase to the interest on your repayments, in order to mitigate risk. From October onwards however, it would be assessed at 3%. And something that people on fixed rates might need to consider: the 3% is added to the rate that their loan reverts to at the end of the fixed rate period, which is generally higher in this kind of environment.

The move was designed to stop people from overstretching themselves and also take a bit of competition out of the market. By year’s end, there were more listings and property prices had settled somewhat, but it’s not certain how much APRA had to do with this.

Technology rethink

A huge couple of years of borrower demand have exposed some shortcomings in the turnaround times for loan applications through some of the major lenders.

A number of loans with attractive interest rates and great features actually missed out on business because the lenders were unable to process loan applications in time. Approval time is something that mortgage brokers monitor. They can then let their customers know which banks are actually likely to settle their finance in time.

And the stakes are high for borrowers, because there’s nothing worse than getting a deposit, getting finance approved, house hunting for months, finally winning a bid on a property and then the bank’s slow administration process means you miss settlement, can’t buy your property and in some cases, lose your deposit.

As a result, a lot of smaller lenders with better technology for loan processing won a lot of business. Already, some of the biggest banks have recognised their shortcomings here and begun to unveil new tech to fix the glitches.

This coming year will be an interesting one to watch.

To find out more on how you can take advantage of what’s been mentioned, book an appointment with our Zinger Finance Mortgage Strategists to see how we can help you.

 

 

RBA Announcement November 2021

It’s all about the number ‘1’ this month for the RBA, after it left rates on hold yet again at its November meeting.

It’s now 1 year since the official cash rate was last changed…and 11 years since the rate was last increased. Meanwhile, there are now more than 200 home loan product rates that begin with a 1, but more about that later.

What the RBA said

RBA governor Philip Lowe said Australia’s economic recovery from Covid was underway and that the central forecast for GDP was growth of 3% over 2021, followed by 5.5% and 2.5% over 2022 and 2023 and an improvement in employment levels provided there were no further setbacks on the health front.

The Delta outbreak caused hours worked in Australia to fall sharply, but a bounce-back is now underway,” Lowe said in a statement. “The Bank’s business liaison and the data on job ads suggest that many firms are now hiring, which will boost employment over coming months. The central forecast is for the unemployment rate to trend lower over the next couple of years, reaching 4.25% at the end of 2022 and 4% at the end of 2023.

A number of analysts are now starting to mention that inflation, currently at 2.1%, has hit the RBA’s target range for a rate rise earlier than expected, but Lowe remains cautious.

“Inflation has picked up, but in underlying terms is still low, at 2.1 per cent,” he said. “The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time.”

Lowe noted that housing prices continue to rise in most markets and said he “welcomes APRA’s recent decision to increase the interest rate serviceability buffer on home loans.”

This time last year

When the RBA made the choice in November last year to slash the cash rate from 0.25 to 0.1%, there were just 19 home loan products with an interest rate below 2%. Of these, 6 were variable, 9 were 1-year fixed, 1 was 2-year fixed and 3 were 3-year fixed, according to research from RateCity.

Now, there are 202 home loans with interest rates starting with a 1. Of these, 62 are variable, 54 are 1-year fixed, 70 are 2-year fixed and 16 are 3-year fixed.

Today, just like 1 year ago, there are zero 4-year or 5-year fixed rate products with rates below 2%.

The property market has seen very strong value growth in the year since the last rate movement and RateCity research director Sally Tindall believes the spike is a direct result.

“The surge in home loan rates under 2 per cent since last November helped set the property market alight and in doing so, has widened the gap between those already in the market, and those priced out,” Tindall said. “In the last 12 months, the average house price has jumped $350,505 in Sydney and $162,138 nationally.

Where does it all end?

Tindall believes the potential for a rise in rates, plus the effect of recent APRA changes to serviceability buffers will see the property market eventually run out of steam.

The eye-popping property price rises over the last 12 months aren’t likely to continue into 2022 at the same pace, with fixed rates already on the rise and renewed speculation a cash rate hike will come earlier than 2024,” she said. “APRA is also at the ready to reign in the number of households head over heels in debt, with its new 3% serviceability buffer due to kick in … along with a threat to take further action if needed.”

Meanwhile, AMP’s Shane Oliver says the second half of 2022 is when he believes the market will hit is ceiling, followed by potential value falls in 2023.

“By the end of next year, I think the upswing will come to an end, and we’ll start to see price falls as higher interest rates feed through,” he told the Australian Financial Review this week. “I think later next year, we’ll start to see higher variable rates, and the combination of higher interest rates, poor affordability and increased listings, I think will start to weigh on the property market.”

 

 

What-The-New-APRA-Restrictions-Mean

What The New APRA Restrictions Mean

This week the Australian Prudential Regulation Authority (APRA) intervened in the property market by tightening some of its rules around borrowing and loan serviceability.

APRA wrote to banks and told them they had until the end of this month to increase the rates at which they calculate a borrower’s servicing power from 2.5% to 3%. What this means is that banks will now stress test loan applicants by calculating whether they can pay 3% higher than their current interest rate, rather than the previous 2.5%. So if you are applying for a loan with a 2% interest rate for example, you’ll have to demonstrate you were able to service a 5% loan in order to be approved. The reason they do this is to make sure individual borrowers can handle future interest rate rises without going bust.

What APRA hopes will happen as a result is that some of the steam will come out of the housing market.

They made the call after their latest data revealed more than a fifth of new loans have people borrowing six times or higher their annual income, something they regard as a level of concern. In the meantime, national property values have increased by more than 20%.

What does this mean money wise?

In a nutshell, APRA believes the change will result in a 5% reduction in a household’s maximum borrowing power.

So if your borrowing capacity was $1 million previously, it will now be $950,000. If it was $500,000, it will now be $475,000.

The numbers are significant enough to knock a bit of buyer competition out of the market and also stop those close to full capacity from biting off more than they can chew. However, those who borrow well within themselves won’t necessarily be negatively affected.

The fix is in

For variable rates, the 3% buffer is added to the rate that you are offered.

However, if you’re wanting to apply for a fixed rate loan, beware, you may be in for more of a shock under the new rules. This is because banks will calculate your 3% buffer based on the revert rate, rather than the fixed rate. The revert rate is the rate the loan will roll over into once the fixed period is up. So, if you are applying for a fixed loan with a 1.99% rate in the fixed period, but that rate reverts to 3.5% afterwards, the bank will calculate your serviceability at 6.5%, rather than 4.99%.

Seems like APRA always targets investors

Investors are often seen as cashed up magnates who swoop in and whisk properties away from the first home buyers and families who so desperately need them.

This is why APRA restrictions in property booms are usually set up in a way that investors are deterred by higher rates or more taxes, so that owner-occupiers can buy homes with less competition from people who may already own multiple properties.

APRA believes investors tend to borrow at higher levels of leverage than owner-occupiers and also have existing debt already, which may expose them to more risk. This is why investor loans always have higher interest rates than owner-occupier homes. Because the rates are already higher, the new buffer will affect investors even more. Not only that, but the buffer will be applied to their existing debt too.

Is this temporary?

It might be temporary, but if the measures don’t have APRA’s desired effect, things might get even tougher before they get better, so it’s important to adapt and evolve if you’re looking to build the kind of property portfolio that will help you live life on your own terms.

Things just got harder for investors, but there are always options out there and value to be found.

If you need help making sense of the new rules, what it means for you and how to tailor you strategy going forward, reach out to the Zinger Finance team.

 

 

RBA Announcement September 2021

The RBA left the cash rate on hold at 0.1% at its September meeting, surprising no one..

The central bank has been telling everyone for some time now that it won’t consider a rate rise until at least 2024, even though some analysts are predicting it will hike earlier than this. And it also remains determined not to cut again and risk going into negative territory, though other analysts think negative interest rates are far more likely than an increase anytime soon.

“Prior to the Delta outbreak the Australian economy had considerable momentum,” RBA governor Philip Lowe said. “GDP increased by 0.7 per cent in the June quarter and by nearly 10 per cent over the year. Business investment was picking up and the labour market had strengthened. The unemployment rate had fallen below 5 per cent and job vacancies were at a high level.”

Lowe said Australia’s economic recovery had been “interrupted by the Delta outbreak and the associated restrictions on activity” and that he expected a decline in GDP in the next quarter and a rise in unemployment.

However he said some areas are “continuing to grow strongly” and the setback to the economic expansion “is expected to be only temporary.”

Taper the talk of the town

Much of the contention and anticipation in the lead up to the meeting had all been about whether the RBA would taper down its buying of bonds from $5 billion a week to $4 billion a week.

September was the month it planned to make that reduction, but there had been widespread debate from forecasters and major lenders about whether it would actually happen.

On one side of the coin, NAB was predicting it would continue with the reduction as planned. On the other side, ANZ anticipated a month’s delay to get a better idea of when and what lockdown restrictions might be lifted or eased in major cities. Most analysts expect a strong post-lockdown economic rebound, which could come this year or next year.

So what was the call?

Spoiler alert, the RBA surprised quite a few when it decided to stick to its plan.

The Board’s decision to extend the bond purchases at $4 billion a week until at least February 2022 reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak,” Lowe said. “These bond purchases, together with the low level of the cash rate, the yield target and the funding that has been provided under the Term Funding Facility, are providing substantial and ongoing support to the Australian economy.

Banks battle for borrowers

Continued uncertainty is a win for would-be borrowers, with banks dropping variable rates in a bid to attract new customers.

Fixed home loan rates may continue to rise, but in a further show that we won’t have to worry about higher variable mortgage payments for a long time yet, RateCity research found the number of variable rates under 2% in the market has leapt from 28 products to 46 in just 2 months.

The 68% increase has happened in spite of there being no official rate movement since November last year.

“Since COVID, the battleground for the banks has been fixed rates. However, with record numbers of customers now locked in, some lenders are shifting their sights to variable rates,” RateCity research director Sally Tindall said, adding that ABS data showed refinancing hit another record high in July with $17.22 billion in loans settled for the month. “The latest surge in refinancing is putting pressure on the banks to keep their rates competitive.

“Banks need to be winning new business, not losing it, if they want their loan books to keep moving in the right direction.

“Well over half of all mortgage holders are still on a variable rate. That’s a huge market of potential refinancers for the banks to target.”

Reach out for a better deal

Each month, regardless of what the RBA decides to do, there are deals out there to be made. It’s a great time to be a borrower and it’s rare that your current deal is the best one available to you. Reach out to Zinger Finance and our team of financial strategists can help you build a strategy for structuring your finance and find the deals that suit you best.

 

 

RBA Announcement – August 2021

The RBA left the official cash rate on hold at 0.1% today, as rolling lockdowns keep Australia in a state of economic uncertainty.

RBA governor Philip Lowe had already reaffirmed his intention not to raise rates until at least 2024, but some analysts thought the move might come earlier. However, the Delta variant of Covid and the constant lockdowns called around major capitals has that speculation on ice for now.

At its monthly board meeting, the RBA also decided to maintain the target of 10 basis points for the April 2024 Australian Government Bond and continue its stimulus measures of purchasing government securities at a rate of $5 billion a week until September and then $4 billion a week until November and potentially beyond.

In its media statement the RBA noted that while the economic recovery in Australia has been stronger than was expected, recession was on the cards, saying “the recent outbreaks of the virus are interrupting the recovery and GDP is expected to decline in the September quarter”.

However, the central bank expects a fast recovery next year. “The economy is benefiting from significant additional policy support and the vaccination program will also assist with the recovery,” it said.

The RBA says it will continue to monitor and review its approach to the rate of bond purchases, according to economic condition and the nation’s health situation. The board still believes conditions will not warrant a rate increase until 2024.

Sentiment suffers

Meanwhile, a recent survey of 40 experts and economists by Finder revealed that two in five believed another two months of lockdown could cause another recession.

The positivity around Australia’s quicker than expected recovery from last year’s lockdowns has disappeared in a flash, with confidence in key indicators such as housing affordability, employment, wage growth, cost of living and household debt all plummeting. Confidence in employment had the sharpest fall, going from 71% in July to 29% in August.

Other key takeaways from the survey of experts included 52% believing household debts would increase due to lockdowns; while 43% believe Australia’s response to the pandemic has seen our international reputation take a hit.

“Economists fear that a prolonged lockdown could push us into recession, and the extension of the measures in Sydney will get us a third of the way there,” said Graham Cooke, Finder head of consumer research.

Give yourself a rate cut

There may be a pause on talk of official cash rate rises, but there have been a number of interest rate movements from lenders in recent times. While fixed rate products have been subject to interest rate hikes, the opposite is happening in variable rate markets according to further research.

A RateCity study shows 49 lenders have cut at least one variable rate in the past two months. Sounds good, but your bank is unlikely to come to you with a better deal, according to RateCity research director Sally Tindall.

“Variable rates are at record lows, however, most of these deals are reserved for new customers, not existing ones, unless you specifically ask,” she said, adding that the best way to get a better deal was to pick up the phone and ask.

“Before you call, check what rate your bank is giving new customers for the same home loan, but also find out what other lenders have on offer,” she suggested.

“If you are paying significantly more than a new customer, pick up the phone and ask your bank ‘why?’.”

The RateCity study found that more than 73% of bank customers they had surveyed were successful when they asked their bank for a personal rate cut.

“If you have a good track record of paying down your debt, and the bank thinks you might switch to a more competitive lender, they’re likely to play ball,” Tindall said, noting that a reduction of just 0.25% could save you more than $1000 a year on loan repayments.

“A lot of people think a handful of basis points won’t make much of a difference, but if the discount is permanent, then the savings can potentially run into the thousands in just a few years.”

 

 

RBA Announcement – July 2021

The first RBA board meeting of the new financial year was one of the most eagerly anticipated in some time. Not because of what might happen with interest rates – which incidentally were left on hold at 0.1% for the eighth consecutive month – but because the RBA was expected to begin winding back parts of its quantitative easing program as the economy continues to recover from coronavirus ahead of schedule.

Since Australia first went into lockdown in 2020, the RBA has splashed out hundreds of billions of dollars on government bonds and kept the yield on three-year government debt under control in order to offer cheap loans to banks…who would then pass more affordable money onto borrowers.

But is all that still necessary?

Three main goals

There has been plenty of speculation from economists and so-called experts that the RBA will raise official interest rates earlier than its repeated promise of “not before 2024”.

In order to consider moving rates away from the historic low of 0.1% and back up towards longer term averages, the RBA wants to see the unemployment rate keep travelling down, wages growth begin to grow again and inflation to get back to a target bracket of 2 to 3%.

And at least one of those boxes is ticked, with unemployment now down to 5.1%, a 17-month low, even as we head into another series of lockdowns in various parts of the country. There are more people employed than before the pandemic kicked off, which is also partly due to the decline in overseas worker arrivals with international borders closed.

However, the RBA statement from today noted that “despite the strong recovery in jobs and reports of labour shortages, inflation and wage outcomes remain subdued”. The statement added that the RBA expects a gradual and modest pick-up in inflation and wages growth, with inflation likely to only reach 2% by mid-2023, after a short-term bounce to 3.5% over the next year due to the reversal of Covid-related price reductions from the previous year.

RBA takes cautious first steps

The anticipated first step to take in getting things back to some kind of normal was to end the targeting of a yield of 0.1 per cent on three-year government bonds. The RBA today however announced it would continue to maintain the current target to “keep interest rates low at the short end of the yield curve and support low funding costs in Australia”.

The next thing to do would be to wind back the level of spending on government debt. The $100 billion quantitative easing program announced in November last year will finish in September.

The RBA today confirmed that it would continue to purchase government bonds after September but would respond to the strengthening economy by adjusting its weekly spend to $4 billion, down from the current spend of around $5 billion. The new spend will be in place until at least mid-November, at which stage the RBA can take stock of the situation again.

So will official rates rise sooner than expected?

The RBA continues to stand firm and say it won’t be in a position to raise rates until at least 2024.

Even though the housing market is strong across major markets, with value growth, housing credit growth and increased borrowing from owner-occupiers and investors, the central bank says it will not increase the cash rate “until inflation is sustainably within the 2 to 3% target range”.

What about the unofficial rates?

As we’ve reported in recent months, Australian lenders are already increasing their rates independently of the central bank.

They began by raising rates on five and four-year fixed rate mortgage products but have since begun to target three and even two-year loans.

A recent analysis found that in the last month, 19 lenders increased a three-year fixed rate, including Westpac and NAB, while 17 increased a two-year fixed rate.

This was the first month that the number of lenders hiking a two-year fixed rate outnumbered those cutting (albeit only by one, 17-16). Meanwhile, for one-year fixed rates, 13 lenders cut, while 11 hiked.

There are still close to 200 loan products out there in the market for below 2%. So, if you are worried, you’re not on the best deal, remember to regularly see what’s out there and refinance when necessary.

 

 

RBA Cash Rate Remains On Hold At 0.1%

The RBA has left its cash rate on hold at 0.1% during its May meeting today which came as no surprise to analysts.

The decision marked the sixth straight month the rate has remained unchanged, after Australia’s central bank lowered it to 0.1% in November 2020.

RBA Governor Philip Lowe has repeatedly stated in recent months that the rate would remain unchanged until at least 2024, as the bank attempts to maintain its commitments on interest rates and market expectations.

One of these commitments is the three-year government bond yield target of 10 basis points. The initial $100 billion government bond purchase wound up last month and the next $100 billion program is underway.

More jobs but wages stagnant

As Australia’s post-pandemic economic recovery continues, unemployment is on a downward trajectory from its 5.8% level in February, but still remains too high for the RBA’s liking and wage and price pressure remain subdued.

There had been speculation from some corners that rates could fall into negative territory since the November rate cut, which saw the RBA move away from the traditional 25 basis point reduction that would have taken the official rate all the way to 0%, and instead lowered by 15 basis points. But so far the RBA has remained firm.

Most analysts predicted the hold decision, with AMP economist Shane Oliver saying that while he believes a rate rise will come before 2024, now was not the time to make a move.

“While the economy is recovering faster than expected, the RBA is still a long way away from seeing its stated requirements for a rate hike… a tight jobs market, wages growth well above 3 per cent and actual inflation sustainably within the 2 to 3 per cent target range,” he said.

Fellow economist Saul Eslake agreed that a hike may come before 2024, but that wages growth needed a major boost first.

“It will take some time for unemployment to fall to a sufficiently low level to trigger wages growth fast enough to ensure price inflation sustainably within the RBA’s 2 to 3% target range – but I suspect that situation may be reached before ‘2024 at the earliest’,” Eslake wrote in his forecast.

Banks looking four years ahead

Meanwhile in a sign that major banks think official rates have bottomed out and will rise after 2024, lenders have begun increasing rates on long term fixed products.

Last week Westpac and its subsidiaries increased rates on their four and five-year fixed loan offerings.

Westpac’s four-year rate of 1.89% was previously the lowest on the market, but the 30 basis point hike now sees the new rate at 2.19%. Westpac also raised its five-year fixed loan rate from 2.19% to 2.49%.

The last two months have seen 24 Australian lenders hike at least one four-year fixed rate, leaving just six now offering rates below 2%. NAB is the only big four bank to offer less than 2%.

Rate City research director Sally Tindall said Westpac’s 1.89% four-year rate was consigned to the history books.

“With a cash rate hike on the cards in 2024 and the RNA’s term funding facility wrapping up in a couple of months, the bank’s record-low four-year fixed rate was unsustainable,” she said. “It’s hard to see a major bank dropping its four-year fixed rate this low for a very long time, if ever.

“While the majority of banks’ three-year fixed rate changes are still cuts, rather than hikes, the tide could turn later this year as the economy continues to recover.

“The cost of funding is likely to increase in coming years, so it’s no surprise lenders are starting to factor this in.”

Any future rate hike would be a momentous occasion, however, as the RBA has not raised rates for over a decade. The last rate hike was all the way back in 2010, when Australia was still experiencing the fallout from the GFC.

 

 

ZIN-Last-Call-For-2020

Last Call For Property Finance In 2020

If you can remember back to when we were able to go to the pub, ‘last call’ always signified that the bar was about to close for the night and this was your last chance to get a beverage.

‘What? Already?’

The end of the night can creep up on you, because time flies when you’re having fun.

However, you don’t have to be having fun. Time can also speed by when there’s a lot happening…like the year 2020 for example.

We’d barely begun picking up the pieces from the deadly bushfire season, when we were thrown into pandemic panic… if you can believe it, that first lockdown was now more than seven months ago.

While it’s felt like a long year for many (shout out to our poor friends in Victoria especially), it’s about to be all over.

So ask yourself, when it comes to your finance goals, what have you been able to achieve?

And is there enough time to make the rest of the year count.

Bank backlog

If you were still planning to buy property this year, you’re running out of time. An average settlement period of six weeks would take you through to Christmas, and that’s after you’ve sourced the property and made a successful offer.

If you’re in a position to offer a shorter settlement to the vendors, you might be able to get the deal done, but if you need to borrow money from the bank, that could be a whole new kettle of fish.

The pressure put on the banks by COVID and its financial mess means many have a backlog of loan and other applications they will need to get through before assessing yours.

There are stories out there at the moment about buyers picking up great property deals, only to run out of time to settle before the bank is able to pick up and process a loan application that they would be all but certain to grant.

The flipside is that if you don’t need finance approved, you may be able to swoop in and pick up a property from an eager vendor while your competition struggles to get their finances sorted.

As government grants and economic stimulus begin to wind up, there will be a lot of people looking to offload assets to free up capital or get rid of some of their debt.

A motivated seller may mean you pick up a property for $50,000 cheaper than you otherwise would have and that will be money you have earned on the way in when the market gets back into the swing.

Get in shape for summer

There is never a wrong time to make sure your finances are in the best health possible.

Look at the interest rates you are paying on investment properties or your permanent place of residence.

Chances are, you will be able to get a better deal by refinancing, or even calling up your own bank and threatening to look elsewhere unless they give you a rate reduction.

Especially since the RBA dropped rates yet again. With the official rate set at 0.1% there are now lenders offering rates below 2% and RBA Governor Philip Lowe says it will realistically be at least three years before rates look like rising again, so you’re in a strong bargaining position for a better deal.

Prepare for next year

While you’re at it, look at whether you can get a better deal in other areas affecting your household budget.

If you have been with the same energy provider or health insurer for longer than a year for example, you are missing out on a better deal from elsewhere.

Pick up the phone and you may save thousands and make sure you’re ready to start the new year with maximum borrowing power freed up.

Set your 2021 goals now and get the jump on those that do so in January. Make plans and get what you need into place to make sure next year is a great one.

And talk to a Zinger Finance strategist to see what you need to do to get finance ready for your 2021 goals.

Property Interest Rates On The Rise?

There are a lot of changes taking place in order to help banks make more money (not that they need to). And even though the RBA isn’t moving their interest rates, property interest rates are on the rise after the banks decided they’ll do so independently.

The first change to take place was announced last week by Westpac, and discussed by Nathan in his recent Facebook Live seen above. Westpac have stated that, as of the 19th of September 2018, their home loan interest rates will increase by 0.14% independently of the RBA.

 

What sort of changes do we expect to see in the future?

In short, we are expecting other banks to follow suit.

The APRA restrictions have caused all banks to bleed. To compensate for that loss, banks now must raise their rates to get back some of that money.

Depending on what their needs are, they will play around with their interest rates accordingly.

 

So what does this mean for Australians?

The cost of money is going up all around the world. However, in Australia it hasn’t. This will cause 2 things:

  • The Australian dollar will suffer because of it, as all other countries around the world are rising their rates.
  • We are also going to be facing some rate rises independently of the RBA.

What is the good news?

As much as this may seem to be a restrictive situation, many opportunities arise due to it.

Since the interest rates have changed, so will the policies and criteria for lending.

Not many people will be buying or investing in properties. This opens a lot of doors and opportunities for bargains to those who are looking to invest and start building a property portfolio.

Rent prices are very likely to increase, and if you already have a property investment portfolio, you will potentially earn more rental return.

 

Why shouldn’t we panic?

This is just a natural part of the cycle and it’s happening all around the world.

Here at Zinger Finance, we don’t focus on interest rates and, even though property interest rates are on the rise, we’re not concerned about them. We don’t even believe that they will increase dramatically anyway.

In our experience, we’ve found that banks will offer cheap rates just to get you in the door. But, we guarantee you, that these cheap rates come with a lot more terms and conditions that don’t necessarily complement your long-term goals.

Therefore, don’t settle for cheap loans, as quite often they won’t get you very far.

 

What to do next?

Senior Zinger Finance strategist, Graham Turnbull explains that there are solutions, regardless of your current position.

“If you are a experienced investor, focus on building your investment portfolio and make sure to stay away from the bank’s cheap marketing strategies.

If you’re not already an investor, there are heaps of varying interest rates floating out there that you may be able to strike a good deal out of.”

 

As we have said before, we don’t just focus on interest rates. There are many things to consider when choosing the right home loan for you and your situation.

If you are buying your own home, you would potentially look at a different loan structure to what you would look at if you were building an investment property portfolio.

Zinger Finance structures mortgages in a way that minimizes the impact of changes such as the increase of interest rates.

If you have any questions, our experienced team at Zinger Finance are more than happy to help.