In its May 2016 meeting the Reserve Bank of Australia (RBA) changed the official interest rate from 2.0% to 1.75%. The RBA’s decision was largely based on the inflationary pressures being lower than expected.
The RBA’s decision was based on the information that Australia is continuing to rebalance away from mining. This has been reflected in economic growth to date although the pace has lately moderated. This more moderate growth, coupled with increasing lending standards has seen pressure from house prices abate.
The RBA also noted that inflation (CPI) continues to be lower than expected, as there has little wage cost pressure in Australia. This low inflation environment is becoming the norm across the world as seen by the subdued labour costs and very low cost pressures continue. The RBA has noted that markets have been more stable with commodity prices firming.
The US Federal Reserve Bank is now considering increasing interest rates in June after recent data on growth, employment and inflation firmed. This is likely to have some interest repercussions; perhaps the most likely obvious being the Aussie dollar falling further relative to the US dollar. Nevertheless, it points to interesting developments in the coming months.
Official interest rates affect the rates offered to lenders and borrowers. While interest rates falling again, investors and savers continue to find competitive/worthwhile offers difficult. Having said, the market saw several financial organizations raise their rates, particularly the short end. Borrowers have benefitted from lower rates with a general fall in borrowing costs.
Nevertheless, there is a contrast between the lowest and the highest on offer. Below are the latest “best” rates available for both lenders and investors.
|Providers – investors||6m||1yr||3yr||5yr|
|QP Credit Union||3.20%||3.05%||3.20%||3.20%|
|U Bank||UHome Loan Variable Rate||3.74%|
|IMB Bank||IMB Budget Home Loan||3.94%|
|Heritage Bank||Discount Variable Owner Occupier||3.98%|
|Greater Bank||Greater Bank Great Rate Home Loan||3.99%|
|St George Bank||Promotional Rate Home Loan||4.04%|
* The comparison rates for all home loans are based on secured credit of $ 250,000 and a term of 25 years. WARNING: The comparison rate applies only to the example given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers are not included in the comparison rate but may influence the cost of the loan.