Servicing Melbourne, the Mornington Peninsula and wider Victoria
The debate still rages
In this edition we again look at the interest rate debate and the difficult question of remaining on a fixed rate versus variable rate loan.
Final boarding call?
The First Home Buyers scheme is about to provide reduced benefits, so signing a contract this month to purchase a first home is essential to maximise the benefits of the grant.
I hope you enjoy this edition of The Flash!
Regards,
Adrian Williams
Sept 2009
Issue 06
Lightning Fast Home Loans - 500 Victoria Parade, East Melbourne 3002
Tel: (03) 9417 4918 Fax: (03) 9417 4921
RBA Interest Rate rise?
An Interest rate rise is in the offing. At least that's what some of the pundits are predicting.
In September 2009 the RBA opted for the fifth straight month to hold interest rates steady at three per cent (the underlying cash rate that is). But in his accompanying statement, RBA governor Glenn Stevens said the bank would continue to adjust rates to foster economic growth - a comment that has fuelled debate among various experts about when the next interest rate will arrive.
The same concern has flowed through to the public and certainly many Lightning Fast Home Loans' clients, if the number of enquiries in the past month about fixing rates is any indication.
On August 4, Mr Stevens told a House of Representatives Economics committee that interest rates were at emergency lows. By August 6 the debt futures market fully priced in a 25 basis point rate rise by November. You might automatically think that it would therefore be an opportune time to go ahead and fix your home loan for the next 3 or 5 years; but beware, this may in fact be the wrong strategy to adopt right now.
The problem for borrowers is that the banks have already factored anticipated variable rate rises into their current fixed rate loans, citing the current money market rates as the catalyst for these hikes. Consequently most fixed rate loans are now often upwards of 2% higher than current variable rates for the same lender; as such you have to accept a much higher repayment initially in the hope that variable rates will rise enough over the fixed rate period chosen to compensate and then provide a net benefit.
At Lightning Fast Home Loans we are reticent about giving specific advice about such important decisions as each set of circumstances warrants individual assessment. For many people staying with their variable rate loan will prove to be the better financial decision, as long as they are able to manage the possible rate rises ahead.
As very many of you already have, please feel free to contact us to discuss your personal situation if you would like to do so.
First Home Buyers’ Scheme winding back
With apologies for again making the First Home Owner Grant the focus of one of our two articles this month, we felt that a final reminder about the substantial reduction in benefits payable as of the beginning of October was timely and relevant to many of our clients, their families or friends.
If you have a pre-approval in place to purchase your first home or are thinking of doing so, you will be able to derive a substantially increased benefit by getting a Contract of Sale signed before 30/09/2009 – or in the case of building your first home, the actual Building Contract.
In our last edition of the newsletter which can be found on the website, under “newsletters”, we published a full table of benefits and the dates on which changes came into effect and we invite you to review this now.
It is important to acknowledge that some FHOG benefits continue beyond the end of the month, and it would be unwise to enter into a contract just to ‘beat the date’ if it was not for the right purchase, but if you can finalise your decision before then you will enjoy the greater financial assistance from the respective federal and state governments.
Next edition: we shall include an article specifically directed to investors, as the environment is now ‘ripe’ in our opinion for investors to become more active in the property market after a couple of years of being ‘a bit dormant’.
This newsletter and some other articles are also on our web site