Interest Rates on the way up

How high will they go?

By Navjeet Singh Matta

Full Accredited Member of Mortgage and Finance Association of Australia; also Director, Gain Home Loans

The first rate rise of 2010

Dear friends,

On 2nd March 2010 the Reserve Bank decided to increase the cash rate by 0.25% making this the fourth increase in the last 6 months. Although an interest rate increase was expected in February too, the Reserve Bank decided not to hike it. Rate rise is not very good news for mortgage holders and every increase puts extra burden on them. A family with a $300K mortgage will pay an extra $49 every month to their lender. The silver-lining this time was that all the major lenders only mirrored the Reserve Bank by increasing the rate by 0.25% compared to last time when the increase was more than the Reserve Bank increase. Westpac was the worst - it increased its rate by 0.45% and hence got a lot of negative media attention. Its own customers were unhappy and started looking for alternatives.

Looking forward, economists are predicting more rate rises in the coming months as Australia is coming out of recession quicker than expected. It is expected that there will be at least three rate rises in the near future and then they will remain stable after that. I have been writing in my earlier articles to all of you to brace for these interest rate rises. The best way to prepare for this is to keep making extra repayments, so that when your minimum repayment increases, you don’t feel too much pain! There are two benefits of making extra repayments: one, you pay off your loan sooner, and second, you pay less interest over the life of the loan.

We at Gain Home Loans are always trying our best to help our customers get the best deal on the home loan and structure the loan to pay it off sooner. Please contact us on 02 96763417 if you need a new home loan or assistance with your existing home loan. We’ll be more than happy to assist with the same.

Should you go for fixed rates now?

All the major lenders have been very smart by increasing their fixed rates by at least 1.5% more than the variable rates in the last few months. This makes it very difficult for consumers to go for fixed rates as the difference is too high to consider them. The other reason is that many people burnt their hands by taking fixed rates in 2008 when the rates were going up; many of them are locked at fixed rates which are close to 9%. Although the major lenders have fixed rates more than 7%, there are still better deals available. At the time of writing this article there is a lender who is offering 6.99% as a 3 year fixed rate, please call me on 0296763417 if you want further information.

I think it’s always better to split your mortgage between variable and fixed so that you can best of both worlds.

Again, everybody’s situation is different so do contact a professional mortgage broker to discuss your situation. We are here to help you: we free property reports and free home loan assessment. Hundreds of families have benefitted with our Free Services. We provide free RP Data report (worth $79) for existing home owners and also for people who are looking for their first home or investment property. This report can help you put the right offer on the property and also helps you negotiate better with the Real Estate agent. You can order your free report just by visiting our web-site www.gainhomeloans.com.au. Also contact us for free home loan assessment: we deal with all the major and private lenders and can find the best solution for your needs. No need to hop from one bank to another - we have all loans available under one roof and can find the best deal for you.

Contact us at GAIN HOME LOANS, Lvl 1, 9 Flushcombe Rd, Blacktown, visit our Website, or call us 7 days a week on 02 96763417.

Disclaimer: Advice given in this article does not take into account the personal needs and objectives or financial situation of the reader. The reader should consider the appropriateness of this and seek professional advice before making a decision whether to acquire or continue the products and services mentioned.