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Dear valued client
Welcome to the last edition of my newsletter for 2010. It seems like the year has really flown by, and it has had its “moments” that have tested most of us.
Perhaps most unexpected was the decision by the Reserve Bank to lift interest rates by 25-basis-points on Melbourne Cup day in November.
It flew in the face of most predictions by the analysts, and came as something of an unwelcome late year surprise.
However, the speed at which the four major banks lifted interest rates well above the RBA’s mark really got tongues wagging, and started a rush as borrowers looked to switch banks to find a better deal.
Then came exit fees. Political pressure applied to the banks to forego the charges is where we’re at right now and is the main focus of this newsletter.
I also touch on the reasons behind the unexpected rate rise by the RBA and why the analysts are saying a December rate rise is unlikely.
On a personal note Jenny and the kids and I are off to the GOLD COAST at the end of this week for a one week holiday. Caralyn and Michelle will be in the office everyday and your sure to reach someone if you call between 9.30am and 4.00pm. I will return late on Friday the 17th. The office will be closed from the 23rd of December to the 10th of January. I will respond to important emails in that time but it may take a day or two.
A very Merry Christmas to you and your family and a prosperous new year. |
| Exit fees removed – but not for long. |
 An unexpected rate rise such as that sprung on us by the RBA on Melbourne Cup day hurts the hip pocket, with the most recent increase meaning that to service the average mortgage will cost upwards of $80 per month more.
Where the big four banks have really made themselves unpopular is that their rate rises have been well above the RBA’s 25-basis-point rise. The Commonwealth upped its rate 45 basis points, followed by ANZ with 39 basis points, NAB up 43 basis points and Westpac 35 basis points.
So, predictably there has been a rush to change banks – to find that elusive better deal. However, the cost of changing banks (and keep in mind the Government fees also add to the cost) can be quite punitive, especially if you’re in the first four years of the loan.
To temper the anger over exit fees, the Government has stepped in and said enough is enough, putting a halt to these charges.
If you want to change banks, now is the time to do it. Some lenders are offering cash incentives to move to them, however these offers won’t last long, and is expected to evaporate by the new year.
Should you have even just a hint of an idea that you’re not happy with your bank – call me, your broker, as soon as possible. I’ll be able to advise you on the best deals going around and put the wheels in motion to help you change lenders if required.
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| Why rates rise |
 Few topics generate as much interest as… interest. Rates go up and down, and most of us remain unwilling passengers on a merry go round over which we simply have no control.
After November’s unexpected rate rise by Australia’s central bank, the Reserve Bank of Australia, it was the response by the big four banks that really caught the limelight.
Their increases, ranging from 35-basis points up to 45-basis points was in marked contrast to the RBA’s 25-basis-point increase.
All the same, the big four banks upping their interest rates well above the level of the RBA came as no surprise to the RBA board.
The explanation gleaned from the RBA minutes and also offered by the Australian Bankers Association is that the cost of funds to the banks had increased beyond the official cash rate.
It might sound like a bit of economics double speak, but the banks claim they have been absorbing higher funding costs for nearly a year, and were in a position where they had to pass them on, a position that looks to have been not so much endorsed but certainly acknowledged by the RBA.
Interestingly, the RBA also noted that lending rates had been rising relative to the cash rate since the global financial crisis, and it was a factor that was taken into account in setting the cash rate.
Many observers have noted that interest rates are approaching near average levels. Indeed, the average bank variable interest home loan interest rate since 1959 is 8.87 per cent. Many of us will remember the double-digit interest rates of the 1990s, and hopefully, we won’t see those again.
If you’d like to know more about how to find the best home loan that suits you, give me, your broker a call to see how I can help.
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