The Reserve Bank of Australia meets in the first week of September to assess whether interest rates remain on hold or increase. Many economists are predicting that rates are likely to remain on hold.

While the variable mortgage rates are likely to rise or remain on hold, fixed rate loans are currently falling. Some of the deals you can find out there are the moment are as follows;

• 2 Year Fixed Rate – 6.79%
• 3 year Fixed Rate – 6.75%
• 5 Year Fixed Rate – 7.29%
• 10 Year Fixed Rate – 8.09%

Note that these rates are only valid for September 1st 2010. Please go to Smart Search Finance to find you the latest fixed and variable rate discounts.

Warning About Fixed Rates

It is important to discuss with your credit provider whether fixed rates are suitable for your lending needs. You will also need to consider that fixed rate loans may have the following restrictions;

• Most fixed loans do not allow unlimited repayments
• Extra payments beyond the annual limit are likely to incur a fee
• Break fees may apply if you exit the loan before the contract date
• Offset accounts and redraw may not be available

Today ING reduced the interest rate on its Orange Advantage product by 0.80%. This effectively brings the interest rate to 6.71%.  This is available for new and existing customers who initially  borrow more than $300,000.

This product is the first from ING Direct that offers a 100% offset facility that acts like a transactional account.

ING – Orange Advantage Products

Minimum Borrow Amount – $300,000

Interest Rate Discount – 0.8% or 6.71% as of 16th August 2010

Application Fee – Nil

Ongoing Fee – $199 yearly

Valuation Fee – $200 for rural areas

Offset Facility – 100% Offset, transactional, ATM, EFTPOS, VISA Debit, Phone Banking

Redraw Facility – No minimum amount or fees

Early Exit Fees -  Year 1: $1,400, Year 2: $1,050, Year 3: $700, Year 4: $350

Advantages

• Competitive interest rate but there are better for a similar product
• 100% offset account that is full transactional
• Solid lender and held up well during the GFC here in Australia
• No up front fee or fees for redraw

Disadvantages

• Annual fee expensive at $199 yearly
• Early exit fee for first two years higher than most major banks
• No branch access (if that is important to you)

Are There Better Products on The Market

We believe there are better products on the market that offer similar features but at a greater interest rate discount and lower ongoing fees.

To find out if this loan or any other loan is suitable for your lending needs submit a free mortgage quote to compare multiple lenders.

Low doc lending over the last 18 months has tightened significantly. Lenders are increasingly making it harder for self employed borrowers who do not have full financials to borrow. Some of the new changes of low doc loans are as follows;

• 1 year BAS statements required for loans that borrow between 60 and 80 percent of the properties value (LVR 60 to 80%)
• Cash out restrictions apply between the 60 and 80% LVR bracket and can also apply for loans less that 60% which is at the lenders discretion
• The lender may want to look at trading and banking statements
• Variety of product has decreased and interest rates are higher for LVRs between 60 and 80%

The new National Consumer Credit Protection (NCCP) laws require that mortgage brokers, banks and non banks will have to prove that  the borrow is suitable for a loan. This applies to both home loans for the principle place of residence and investment property loans.

Therefore, both brokers and lenders will require added documentation to ensure the borrower is suitable for a loan.

This does not mean that tax returns need to be completed but a broker or lender may need some or all of the following documents to ensure the borrower can afford to make the repayments regardless of loan to value ratio (LVR);

• Minimum 1 year BAS statement
• Bank trading statements for at least 12 months
• Accountants letter
• Projected income
• A declared statement

No doc loans will no longer be available as the NCCP laws make it impossible to legally accept a loan application with out making financial checks.

However, the NCCP Act does not apply to low doc loans that apply to credit of a commercial nature. Low  doc commercial loans and no doc will still operate in this space

It seems the election has slowed things down and the Reserve Bank are in a holding frame of mind. All the economic indicators are showing that growth may be slowing and interest rates are likely to remain on hold for a little while.

Fear in the US of a double dip recession could be on the cards but most econimists are predicting a slower economic recovery rather than another dip.

As mentioned in a earlier post, it seems the Banks are determined to increase interest rates beyond the RBA’s recommendations. Commonwealth Bank after reporting a record profit announced that future rate rises are likely and other banks have not counted themselves out. I am not sure why they have to slug their customers for increased profit; however, one major lender has committed to keeping rates in line with the Reserve Bank.

The Reserve Bank Of Australia left rates on hold at 4.5% on Tuesday as inflation figures fell within their guidelines.

There are some home loan and investment loan specials out there from reputable lenders.

Ongoing variable rates at 6.47%

Fixed rates are falling and you can find a 3 year fixed rate at 6.99% and a 5 year fixed rate at 7.49%

  Below you will find the latest mortgage news from the last couple of weeks. For more information and links to these headlines follow us on twitter@MortgageBrief

• 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

The Reserve Bank of Australia announced that it is leaving interest rates on hold at 3.75%. In a surprise move that stunned most economists the RBA wants to see if the effects of earlier rate rises.

More to come…

New inflation data has indicated that the Reserve Bank of Australia will most definitely raise rates at the February meeting. Some economists are predicting a 0.50% rat rise but the general consensus feel it will be 0.25%.

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.

It looks like for steam ahead for the Australian economy and this generally means that it looks like interest rates are on the way up.  Currently, the RBA have interest rates at 3.75% and economists are predicting a rise to 4.75% before the end of 2010.

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 Reserve Bank of Australia (RBA) left interest rates on hold this month, as anticipated by many economic experts.

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.