13/12/2016
Banks are now starting to increase rates for the first time in a while. Specifically Fixed Term, Interest Only and Investor rates as well as some Variable.
**Please contact me to discuss how I can help you navigate through this unsettled time**
My personal view:
Do I think the cash rate is going up? No! I agree the long term sentiment might have changed. However, in Australia, inflation is at the lower end of the RBA's target and recently a negative quarter in GDP was announced (only the 4th negative qtr in the last 25 years!) These 2 indicators suggest there is no way the RBA will increase rates in a hurry.
Banks get their funding from a number of sources and as sentiment changes, their funding costs are going up and in turn pass this on as higher rates to mortgage holders. As a consequence, long dated Term Deposits are likely to increase slightly as a means for banks to fund their loan book (albeit from historically low rates).
All in all, if I told someone in 1991 they would be paying 4% for a home loan they would have thought I'd left off the '1' as in 14%! Rates are still at all time lows and even 0.25% more is absolutely nothing as long as you didn't borrow more than you can afford. Unfortunately, I worry some people are exposed to the point that 0.25% could really hurt them. Again more reason why given the RBA's prudent stance, they would be very nervous to start increasing rates.
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