Let’s Talk About Rates and the Economy!

Why do we focus so much on interest rates? Apart from the fact that if the full 25 basis point cut in the cash rate to 3.25%is passed on in full by lenders, it would reduce the average monthly repayment on a $300,000, 25 year loan by about $48. BUT … the RBA cash rate needs to reflect the true state of the economy and it’s the RBA’s role to keep rates where they believe they need to be based on all the information available. This includes when the banks are facing funding cost pressures which show up in higher deposit interest rates relative to official rates and rising wholesales funding costs. The RBA wants the interest rate that borrowers actually pay to be lowered as it deals with:
• low inflation at 1.2%,
• low unemployment (rate to be announced week of 8/10 up marginally to 5.3%) although the RBA
noted it appears the labour market has softened recently,
• the over-valued Australian dollar (at 8/10/12 A$/US$ 1.107)
• and significant global economic risks.
The RBA cuts are aimed at having an impact on the whole economy with full knowledge of how much it costs a bank to raise the money that it lends to us. Interest rates are now the lowest they have been for 3 years. It’s a good time to compare your mortgage rate to what is being competitively offered in the market right now. Contact us at The Home Loan Company for a no obligation loan comparison and let us do the work for you. We are one of the most experienced mortgage brokers in Sydney and will be happy to arrange the right mortgage finance for you.