Traditionally the Melbourne Cup has seen the Reserve Bank of Australia (RBA) make changes to cash rates. While many, including several market economists, thought the odds of lower cash rates were high the RBA decided to leave the cash rate at 2.00%.
The RBA’s decision was based on a more optimistic assessment that the Australian economy is continuing to grow at a “moderate” level.
It noted there has been stronger business and consumer confidence that has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment. The RBA also noted that inflation (CPI) is low and should remain low.
By the way, most would have noticed that the big banks increased their lending rates prior to the RBA announcement. According to the big four, they pushed up rates because of the requirement to hold more capital to prop up their low reserves. Interestingly, the Prudential Regulation Authority has started asking for more capital and will ask for more again. Higher capital reserves imply mean higher interest rates!
So while there is scope for further easing rates ( market is almost pricing a full rate cut by February 2016 ) the are a number of factors and variables that can affect the final interest rate outcomes to borrowers and investors.
Official interest rates affect rates offered to lenders and borrowers. Currently borrowers are enjoying the lowest rates in the last 50 years.
On the other side of the equation, conservative investors and savers are finding it harder to “earn” a decent rate as term deposits have fallen dramatically in the last 12 months. 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|
|Bank Australia||Owner Occupier||3.98%|
|Heritage Bank||Variable Home Loan||3.98%|
|UHome||UHome Loan Value||3.99%|
|AMP||Essential Home Loan||3.99%|
*The comparison rates for all home loans are based on secured credit of $ 350,000 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,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.
Nick Stratus – Solid Financial Advisors – November 2015