Posts

Interest Rate Update – June 2016

/0 Comments/in

Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.75%.

This follows last week’s better than expected GDP figures which showed annualised economic growth at 3.1 per cent.

It is interesting to note that business lending has been growing at a slightly higher rate than housing lending, the first time this has occurred since early 2009. The reasons for this have been the current low interest rate environment, an improvement in overall business confidence together with the influence from the regulatory body, APRA, as they continue to push the Lenders to reduce their growth in mortgage investment lending.

We see no change to the Cash Rate in the short term, although many Economists are expecting another reduction before the end of the year.

Interest Rate Update – May 2016

/0 Comments/in

Cash Rate – Reduced to 0.25%

The Reserve Bank of Australia (RBA) has just announced it will reduce the official cash rate to 1.75%.

The weakness of the March quarter’s inflation figure (-0.2%) shocked many Economists. This was the first time the headline inflation rate has fallen since December 2008 and the resultant annual inflation of 1.3% is the lowest since June 2012. Fuel and fruit prices were the main influences however slower price rises in the regulated sectors such as utilities, health insurance and rates together with low wage growth have contributed.

Low interest rates have been supporting demand and hopefully a lower exchange rate as a result of this reduction will further assist the economy.

 

Interest Rate Update – April 2016

/0 Comments/in

Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 2.00%.

Notwithstanding a strong Australian dollar the RBA remains comfortable with a contained inflation rate and a slowly improving labour market. Business credit has expanded (0.7% for the month of February) resulting in an annual growth rate of 6.5% (up from 5.5% for the year to February 2015). Housing credit remained at 0.5% for February (7.3% for the year compared to 7.1% for the prior year). The Australian Industry Group manufacturing index also delivered positive news last Friday morning showing an improvement of 4.6 points to 58.1 – the highest level since 2004.

Whilst we remain confident the cash rate will be left untouched for the remainder of 2016 the RBA will keep a close eye on a strengthening Australian dollar.

 

Interest Rate Update – March 2015

/0 Comments/in

Cash Rate – No change

The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.25%.

Following last month’s RBA decision to reduce the cash rate by 0.25% for the first time since August 2013, the RBA decided to defer any action so as to better understand the effects of the decrease before it again reduces the cash rate in another month or two . The RBA is hoping last month’s drop was a clear message to Australian businesses that it is time to improve their appetite for risk and invest more in new staff and equipment.

Interest Rate Update – March 2016

/0 Comments/in

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 2.00%.

It may be Super Tuesday in the United States but it is also a huge week for local financial data, including the GDP figures for our last quarter. The Bank will prefer to assess this information to see just how the domestic economy is performing in the early stages of this year.  Whilst the market is currently forecasting a 60% chance of an interest rate reduction by May we remain confident the RBA will leave the cash rate untouched for the remainder of 2016.

 

Changes to Interest Rates

/0 Comments/in

We recently wrote regarding significant changes in the Australian residential investment loan market over the past couple of months. This intervention by APRA (Financial System Regulator) sparked the beginning of a process for Australian Lenders to not only reduce the volume of investment lending, but just as importantly, to bolster the amount of capital Lenders hold in their balance sheets to ensure we have a stronger financial system.

The first round of capital raising for several lending institutions was achieved by issuing more shares to investors. On 14th October 2015 Westpac announced an increase of 0.20% to home loan interest rates, which was outside of any Reserve Bank movements. The increase in capital requirements by APRA is one of the core reasons for this increase.

Other lenders may stall this process however, we feel it is only a matter of time before all mainstream Lenders increase home loan and investment loan interest rates in the very near future. This will likely unfold in the next few weeks.

What should I do?

As we mentioned in our previous posts, our recommendation is not to make any quick decisions, as any potential refinance could end up costing more. Instead, should you wish to discuss your loan please feel free to contact us by email or phone (03) 9882 2500 so we can discuss your individual financial position.

financial services

Interest Rate Update – October 2015

/0 Comments/in

Cash Rate – No Change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 2.00%.

The RBA remains comfortable to provide a period of stability, to allow business and consumers some certainty over the coming months particularly following the recent change of political leadership. The financial markets are currently pricing in the next change in the cash rate for December with a 0.25% reduction. Unless there is significant untoward domestic and global economic data it is our view the RBA will hold the cash rate at 2.00% for some time.

Interest Rate Forecast

/0 Comments/in

Australia – Interest Rate Forecast for 2016

Changes to investment loans

/0 Comments/in

In the past couple of months we have seen significant changes in the Australian investment loan market.

As you may have seen recently in the media, the Australian Prudential Regulation Authority (APRA) – the prudential regulator of the Australian financial services industry – is concerned about the recent strong growth of lending to property investors, particularly in Melbourne and Sydney. APRA’s concern is that a real estate market slow-down could see a dramatic increase in loan defaults.

Accordingly, APRA has strongly recommended that lenders benchmark the growth in their investment loan portfolios at no more than 10% per annum and, additionally, directed the five major Banks to increase the amount of capital they hold against their residential loan portfolios.

As a result, interest rates on investment loans (in particular interest only and Line of Credit facilities) have increased across all major lenders. There has also been a host of changes to lending policies; all aimed at ensuring a sustainable growth in the home loan investment sector and improving the strength of Australia’s financial services industry. Many changes have already been implemented, but we feel there are plenty more to come.

Should I Refinance?

If you have noticed an increase to your investment loan rate, please be assured that your lender is not the only lender making these changes. Our recommendation is not to make any quick decisions, as any potential refinance could end up costing more, but to contact us by email or phone (03) 9882 2500 so as we can discuss your individual financial position.

Interest Rate Update – September 2015

/0 Comments/in

Cash Rate – No Change

The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.00%.

Notwithstanding the extreme market volatility last week the RBA remains comfortable to remain on the sidelines until there is significant financial data which influences the next change. The reduced Australian dollar, improvement in our employment numbers and the proposed interest rate increase in the United States is providing the RBA with comfort to defer any movement at this stage.