On Tuesday, the Reserve Bank of Australia (RBA) made the decision to once again leave the cash rate at 1.5%.
The decision is dependent on several factors, including the performance of the Australian dollar, the state of the housing market and inflation. The last time the cash rate rose was in November 2010 however last decrease was in August 2016.
No doubt you are aware of the government decision to hit the big banks with additional taxes and levy’s. Who is likely to pay for this? Will it be banks? The shareholders or the banks customers? It may be a combination of the lot however who are the likely winners? The smaller banks which will be competing for their business! Make sure you seek advice from a mortgage broker if this affects you.
What does this mean if I own a property?
When the cash rate stays the same, you often won't see much change in your repayments. However, the big four Australian banks recently started to raise their interest rates for investors and owner-occupiers with interest-only loans, independently of the cash rate. Other smaller lenders are now beginning to follow suit and raise their own interest rates despite the unchanged cash rate.
Keep an eye on your lender’s rate because even the slightest interest rate rise could make a considerable dent in your monthly budget. If you do find yourself struggling with increased repayments, speak to someone at Peer Wealth to discuss your options.
What if I am looking to buy a property?
If you are on the lookout for a new home, things may be about to improve for you. Following APRA's move to restrict interest only loans to just 30% of new residential home loans settled, the number of investors entering the market is gradually dropping. That, combined with the unchanged cash rate may result in a decrease in auction attendance numbers and ultimately greater affordability for home buyers.
Extra costs to look out for this month... Your interest only home loan: If you have an interest only home loan at a variable rate you may be in for a surprise this month. Most of the big banks have raised rates by between 0.3% to 0.35%.
Big banks passing down levy costs: This year’s federal budget announced extra taxes for the country’s biggest banks. Despite the government's repeated warnings, the big banks are insisting that these fees must be passed down to their customers. Keep an eye out for extra savings account fees, credit card fees and particularly home loan repayment hikes independent of cash rate changes.