November 14, 2012
Following this month’s Melbourne Cup Day cash rate decision that saw the Reserve Bank of Australia hold the rate steady at 3.25%, borrowers are encouraged not to lose sight of the positive signs in the home loan market.
While consumers are struggling to gain confidence, there is encouraging economic data that shows Australia is experiencing high levels of housing affordability. According to QBE’s latest Australian Housing Outlook report, the proportion of household income being put towards mortgage repayments has fallen in New South Wales.
In fact, apart from a period in 2009 when the RBA cut interest rates aggressively in response to the GFC, we are looking at the best levels of affordability in the state since the beginning half of last decade.
Despite the fact that there are some positive signals in the market, consumer confidence is still worryingly low and the decision to keep rates steady is unlikely to help this improve overnight. While it is understandable that the rising cost of living is having an impact on consumer sentiment, when looking at the pace of economic recovery, it is important to take in the whole race and all factors on the field, not just the finish line!
A rate cut this month would have been a win for borrowers but there are other ways to improve your financial outlook and to repay your mortgage sooner. Although the Reserve Bank of Australia’s cash rate decisions offer a good indication of where interest rates are headed, what really impacts a borrower’s hip pocket is the rate charged by their lender.
Keep in mind that lenders’ interest rates are also based on a multitude of other factors such as their funding costs, competition for retail deposits, whether or not the customer is new or existing and the size of the loan amount applied for.
With rates being held steady, borrowers should take this opportunity to get a home loan health check by asking your mortgage broker whether savings can be made on your home loan, or even whether there is a better priced product on the market for you.
Sometimes, if you have a larger loan amount and/or have other accounts or debt commitments with a lender, they might consider giving you an interest rate discount. But it is worthwhile to consider the pros and cons of staying with your existing lender as opposed to shopping around.
When deciding whether to switch loan types or lenders, take a good look at the cost versus the benefits and weigh up what you really need as opposed to want. Remember to factor in all loan aspects, like features, rate, repayment type and frequency, accessibility and fees. It may be cheaper to keep your existing loan rather than pay new loan costs such as application fees, lenders mortgage insurance, registration fees, account fees, discharge fees, etc.
While it can be all too easy to listen to the latest news about the economy and interest rates and to feel helpless, there are always steps that we can take to ensure we make a positive impact on our personal finances. Every saving you can make on your home loan helps, especially ahead of the fast approaching festive season!
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"