Finance

News and updates on all things finance. We look at all issues that affect you and your mortgage whether you are a first time home buyer, looking to refinance or an investor.

The Claytons Rate Hike

Danny Masri - Tuesday, September 06, 2011

The interest rate ‘hold’ decision today marks ten straight months of flat rates; the most stable interest rate environment for five years. Anyone would be forgiven to raise an eyebrow at that; the spectre of an interest rate rise has been lurking since at least March when inflation once again moved above 3%.

Even though the RBA hasn't increased rates since November last year, the minutes the RBA releases following its meetings have mostly pointed to what the RBA has terms "tightening bias" - which means that the Board is mostly considering increasing interest rates.

These minutes allows the RBA to be transparent, but more importantly it allows us to get our financial affairs in the right kind of order for a potential rate rise.

In many ways, speculation about rising interest rates has virtually the same effect as the cash rate actually rising. By telling us that rates might rise they change our behaviour. Consumers remain cautious about taking on higher levels of debt and are less willing to make high commitment purchases such as housing, investment or big ticket retail items, which is exactly what we've done since November.

On average, Australians continue to pay down debt and increase their savings rate - just the sort of behaviour you'd expect if you thought that rates were going to rise

But regardless of that argument, it's a reasonable assumption that the RBA will increase interest rates in the next 12 months, and when they do, the banks will follow. So your first move should be if you've got a variable rate mortgage is to have you loans reviewed and seek out a better cheaper alternative. Banks are strongly competing for new business so now is the best time to switch and save.

Your second move should be to increase your repayments as much as you possibly. Every dollar you pay ahead of time will both reduce the length of your loan, and make you less vulnerable to the next rate rise. In fact, paying down debt (especially non tax-deductible debt) is the best way to get ready for any rate rise. 





 



 


Comments (0) | Trackbacks (0) | Permalink





Comments

Post has no comments. 



    
Post a Comment

    

    


    No      Very 

    
 

     

    
 

     

    
 

     

    
 

    
Captcha Image




 

    
 

     

    
 

    

    
    








 


    






Recent Posts


 


Tags


 Finance  Best Interest Rates  GDP  Housing Affordability  should I fix my loan  Investment Loans  switching banks  Property  variable rate home loans  Cheapest Interest Rates  Home Loans  Fixed Interest Rates  Basic Home Loans  Exit Fee Ban  Refinance  European Share Markets  RBA  Lenders Mortgage Insurance  First Home Buyer  Investments  Reserve Bank Board  Interest Rates  Inflation  construction loans  Interest Rate Rise  Interest Rate Cut  LMI  Fixed rate home loans 
 


Archive