How quickly things can change in one month. At the last RBA meeting all the talk was of rising interest rates, now the speculation seems to be when they will fall and by how much.
At this month’s meeting the RBA have decided to take a ‘wait and see’ approach to the current market fluctuations and despite many predicting large and fast rate falls the RBA have decided to leave rates on hold – for the 10th consecutive month. They will closely monitor world financial markets and the local market, but will not likely be rushed into any knee-jerk reactions either way.
It has also been hard to miss the share market recently taking a huge hit, which I believe will result in more investors starting to flood back into the property market. Why? History shows that over the past 50 years of stock market crashes, usually a property boom follows.
You have heard the comments that we are currently in a 2 speed economy, with mining doing exceptionally well yet retail and manufacturing struggling - this is a major reason why the RBA will wait and see what happens in general terms. Raising or lowering rates now could have drastic effects on each of those 2 speed economies and no one wants drastic changes anywhere.
So to the million dollar question - will rates move down or will they move up? Good question.
The answer? Simply we will have to wait and see how the economy performs. While in the short term current interest rate pressure is weighted to the downside and this is the most likely outcome at the moment, a turn in the overall economy and money markets could quickly have us return to upward pressure in the midterm.
But, as the saying goes, always look on the bright side of life and every cloud has a silver lining.
The silver lining right now is that fixed interest rates have plunged in the last month (Especially 3 year rates) with rates in the mid 6% range readily available. If we look at rates over the last 20 years then this is historically low. CAUTION however, if you are considering fixing, always think before you act and look at all the possible ramifications. Everyone’s situation is different and fixing should be considered only after looking at your personal position and goals - there is no ‘One size fits all’ approach. However, people should take care not to be enticed to fix their home loan for all the wrong reasons.
Fixed rate movements are generally very good predictors of what lenders think will happen to interest rates, so there is the possibility that variable rates might go down given the global turmoil.
If we remember back a few years there were more than 100,000 people who opted to chase cheap fixed rates and this kind of slashing frenzy was the focus of media attention. Sadly these people were left sitting on the sidelines watching as the RBA was dropping rates dramatically over a matter of months with no benefit to them or their mortgage repayments. In the end, costing customers more money. Banks are in the business of making money and will set rates accordingly to make money.
If you are like me and sick of all the bad news headlines and the political fighting that is going on with everyone playing the blame game then remember this…..Don’t worry about things you can’t change.
So concentrate on those you can, you CAN choose to be positive - if only the media had a positive mindset. In the end our results reflect our thoughts.
Until next month keep well. Remember I am only an email or call away if you need any assistance.
Regards,
Gregg Mountford
Negotiator Finance
