Friday, January 25, 2008

Will they or won't they?

It’s the big question surrounding interest rates – Will they be raised, when and by how much?

Since late last year there have been a number of varied and conflicting reports throughout the media. Throw into the mix Christmas, the January Sales and not to mention a change in Federal power and it certainly heightens this already hotly debated topic!

This week I came across a Sydney Morning Herald article by Nicole Pedersen McKinnon which put forward some interesting points in regards to recent and potentially upcoming rate rises.

If you are rushing to fix your mortgage - stop! The banks are way ahead of you.
You can't have missed that the big five have now increased their variable rates: in order, NAB, ANZ, CBA and, on Friday, St George and Westpac.
What you didn't see on the news, however, was that in early January ANZ lifted its fixed rates by 0.25 - more than it subsequently increased the variable rate. But that's not a patch on biggest lender, the Commonwealth. By only raising variable rates 0.1, it managed to come off as almost magnanimous - except that it had already upped fixed rates by 0.3 percentage points.
There's a broader issue in all of this, too: what the RBA will do next.
Evidence is mounting that we are at the top of the interest rate cycle - you have to go back more than 12 years to find rates as high as we now have. If the subprime crisis at the heart of the credit crunch sends the United States into recession, economic growth here could slow and rates could actually start to fall.
The upshot is that the best way of fighting a rise may be to get a better variable deal. Infochoice says many institutions still have rates below 8 per cent including Austral Credit Union, Citibank and Yes Home Loans.
But if you are determined to fix, perhaps to get repayment certainty, some of the best deals come from a surprising source: the online arms of the very banks that have been jacking up the fixed rates on their branch products. The CBA's Homepath is offering a three-year fix of 8.14 per cent, half a percentage point below its regular product. Meanwhile, the ANZ's One Direct has a fantastic 7.94 per cent deal, 0.6 below.
So, act fast, and you can beat the banks at their own game.

This is just another viewpoint, so obviously seek your own advice before taking any action! We’ll all keep watching with interest as the whole topic plays out…

Karen Raffen, CEO

© Toop Real Estate Group

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