• Reserve Bank of Australia says that the election won’t stop us raising rates Wednesday 21st July 2010
• Inflation the key to rate rises RBA
• Lenders may increase rates independent of RBA due to higher funding costs – Monday19th July 2010
• 95% loans are still available
• Interest rates remain on hold at 4.50% – Tuesday 6th July 2010

More to come…

I have heard mixed reports as to what the banks will do. As stated in a earlier post that banks are still concerned about high funding costs. The RBA and other commentators suggest their is no need for the banks to raise rates beyond the RBA recommendation. We will just have to wait and see.

Access Economics have claimed that the major banks are likely to under cut the Reserve Banks reccomended interest rate increases as a PR campaign to win back customers. You can read the full story here.

I am never sure that the majors will miss a profit opportunity and coupled with reports of higher funding costs I think it is highly unlikely the majors will increase rates less than the Reserve Banks recommendation.

Here is a summary of what we can expect for 2010 from the latest news headlines.

- We can expect higher interest rates at the end of the year.  Some economists are predicting a rate rise of at least 1 percent

- Banks are still going to complain about higher funding costs and are likely to  increase rates higher than the recommended increases stated by the Reserve Bank of Australia. However, this may limit cash rate hikes implemented by the RBA

-  Rents are likely to rise in 2010 due to the housing shortage

-  Loan defaults are likely to rise as interest rates increase catching out many first home buyers

- Many more to come….

As for the predictions mentioned above they are more likely to happen than not, however, the economy is a living breathing beast and where it leads it is any ones guess.

The RBA have left room to move for further rate cuts if the Australian economy retracts.

We have to wait and see how the Australian economy stands up to this current global financial crisis. For now we should enjoy the lowest interest rates in 50 years and see what the future has install.

The RBA cited a stabilising of the world and Australian economy was the main reason for keeping rates on hold for the second straight month.  Australian rates have more room to move downward if there is a relapse in the local and global economy.

Some economists still believe that the official cash rate will be at 2.5% by the end of 2009. We will have to see how global economic conditions fair for the remainder of the year.

Commonwealth Bank – 3 Year Rate Saver – $0 loan service fee for new borrowing

Homeloans – $0 upfront for their Premium Full Doc Loan

St George Basic Variable – Low rate at 4.99%, no up front and ongoing fees for new customers only.

Westpac – .20% discount on all fixed rates under Premier Advanatge Package. Nil upfront fee for Flexi First Option Home Loan for first home buyers.

Economists expect interest rates to remain on hold as signs of the global economy begin to steady, however, their is a bias for rates to be reduced later in the year.

Further rate reductions will depend on the outlook of global and local economic conditions. If it begins to worsen again then the Reserve Bank may reduce rates again. For now it is a wait and see approach.

The Reserve Bank will provide its outlook for Australia this week and this may indicate a hint where they see interest rates for the remainder of the year.

Grants of $14,000 for established homes and $21,000 for new purchases will stay until September 30. From October 1 to December 31 the grant will be scaled back to $10,500 and $14,000 and return to the original amount of $7,000.

State governments have also given first home buyers a hand by either reducing the stamp duty and or adding to the grant with funds of their own. Check with your state revenue office to find out what concessions you are entitled to receive or contact us.

Most lenders have not adjusted their variable rates but some are increasing their fixed rate loans for 3 to 10 years. Depending on the lender you are likely to find a 3 year fixed at 5.30% and a 5 year fixed at 6.00% 

Lenders are also reducing their portfolio risk by decreasing the amount a person can borrow against a properties value. NAB and St George are the last to introduce the 90% maximum borrow amount, however, some banks lend up to 95% providing there is an established relationship with the bank for a minimum of 6 months.

100% home loans have disappeared from the mortgage market unless you can use other property as security for the loan.

If you need help and require a loan above 90% please feel free to contact us.