An update from Managing Director Daryl Borden
It was no surprise to see the Reserve Bank decrease interest rates 0.25% at its monthly meeting in August.
The incentive was provided by the combination of inflation remaining below target, and an Australian dollar remaining stubbornly high. Concerns over a growing potential real estate ‘bubble’ have previously held back the Reserve Bank decreasing rates, however trends in mortgage lending and total lending growth at the time this decision was made were down, alleviating concerns.
Most disappointing was the lack of flow through to home owners of the decrease. The four major banks have only passed on from 0.10% to 0.14% of the 0.25% decrease in the cash rate!
I have to admit there is a valid bank argument that their funding costs have increased. It is also true that we are fortunate in Australia to have a very strong banking system which has saved us from the financial disasters seen offshore in the past (that is an ongoing issue in many other parts of the world).
However, those of us who owe the banks need to continue to fight them for lower rates!
I encourage you to check your rates. Do not be afraid to call your bank and ask for a better deal! In doing so be aware most banks are now charging higher rates for investment loans, and higher rates for interest only loans. One of the major banks decreased rates in August by 0.14% – but in the small print – the reduction was 0.10% on interest only loans.
Some of these changes have been engineered by government departments and forced on the banks. It is important we respect the role banks perform in our society, and the constraints under which they operate. It is also important that each individual bank customer regularly review their own position.
It is a fact that many customers happily pay more than they need to on their mortgage. They are the lazy ones who do not review. They also help fuel the bank profits to enable others to get better rates! Which type of borrower are you?
We offer a free and easy mortgage review, which you can complete right here on our site. Or, get in touch with us at 03 9511 8883 if you’d like to talk in person about how we can find a better mortgage rate for you.