Just now, the Reserve Bank of Australia announced the official cash rate has been kept on hold at 1.50%, citing the low level of interest rates is continuing to support the Australian economy.
It’s been a busy week with the first of the big banks, Westpac, opting to hike rates, inciting speculation the other big banks will soon follow. Some of the smaller ones already have: Suncorp, Adelaide Bank and Bendigo Bank have all raised variable rates, blaming “challenging” market conditions and increased wholesale funding costs.
What’s next for the RBA?
Economists asked by The Australian Financial Review speculated similar moves by other banks would likely delay the RBA’s decision to hike the official cash rate – with some even saying the RBA would cut the rate at some point in the near future.
The banks’ decisions to increase rates out of line with the RBA is based on covering wholesale funding costs. What this means is that the cost of the money (debt) the banks need in order to lend to you as a consumer has gone up – which reduces bank profits. In order to make up the shortfall, they have decided to charge you (the retail customer) more. Simple? Maybe. Unfair? Probably.
What to do about lenders increasing rates
What can you do about it? If you’re with one of the banks that has raised rates, you could look at switching lenders. uno’s advisers can look at how much you’re paying now and what your repayments will be under the increased rate and see if there’s a better deal for you out there.
Although, there’s no guarantee the lender you switch to won’t also hike its rates in coming months. Moving onto a fixed rate will enable you to lock in your reduced interest rate for a period of time (usually 1, 3 or 5 years).
The only downside to this is, if the RBA does decide to cut the rate at some point in the near future, you’ll miss out on the potential benefits of that.
The property market
It will be interesting to see how raising rates on the eve of the historically busy spring real estate season pans out. Australian home prices continue to slide – according to CoreLogic, home prices nationally dropped 0.3% in August, from July, leading to an annual fall of 2%. So, whether increased rates further stifle the property market is yet to be seen.
uno’s founder Vincent Turner believes unless there’s a massive rise in unemployment, property prices should continue to drift rather than drop significantly. “I don’t see a 20% or 30% correction happening, especially when you look at how far property prices have risen in the past decade,” he said.
With that in mind, if you’re looking for a new loan or wanting to refinance an existing one, submit an application to a lender via uno between 1st August and 30th September and you’ll receive $1,500 when you settle* – as long as your loan settles before 31st December, 2018.
Get in touch today, and remember, uno is here to help.
THINGS YOU SHOULD KNOW*$1,500 offer: Offer only available for new home loan and refinance applications that are lodged with a lender via uno Home Loans (“uno”) between 1 August – 30 September 2018, and settled by 31 December, 2018 (“promotional period”). Eligible applicants will receive confirmation from uno that their home loan application has been lodged with a lender. Eligible applicants will receive a one-time AUD$1,500 cash payment from uno following settlement of their home loan which must occur within the promotional period. Limited to one payment per main applicant. Multiple applications submitted by the same main applicant are not eligible for multiple payments. uno will be in contact with the main applicant upon settlement of the home loan application to confirm the payment details. Payment time is up to 6 weeks after confirmation of main applicant’s payment details. All loan applications are subject to uno assessment and lender approval. Only home loan applications with a total loan amount greater than or equal to AUD$250,000 are eligible to receive the payment. This is a limited time offer and may be varied or withdrawn by uno at any time.The information in this email has been created by uno Home Loans (ABN 81 609 882 804 and Australian Credit licensee no. 483595).The content of this email has been prepared specifically for its intended readers only and no information is intended to provide any form of financial or consumer credit advice or a suggestion to apply for any home loan product. uno has not yet taken into account your financial situation or requirements and objectives but this assessment process can be conducted by uno through an ‘Expert Review’. Before taking out a credit product, you should seek your own financial and/or legal advice. Any opinions or information expressed in the email are subject to change without notice.
This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.