Fixed or Variable Home Loan, What Should I Do?

By Dave Lamari
 
Recently I have had many a question asked on whether it is best to fix or go variable.

Earlier in the year this was a little easier to answer as rates were still relatively low on both fixed and variable.

Recently the variable rates have started moving up of the most recent Reserve Bank decision and their ‘rhetoric’ is definitely along the lines that it will increase even further.
 
Fixed rates on the other hand have actually been moving upward for a few months now and it is safe to say they will continue in line with the trend of the variable.
 
In short this means, similar to what I say to most clients for some time. If you wish to budget and be sure you will know what your repayments are, on a particular loan size, fixing is the only way to be sure.

That is, fix to budget, try not to fix to beat banks at rate rises.

Perhaps a split loan (part fixed and part variable) will give you the combination of the flexibility of a variable and the security of a fixed.

If you have any questions on fixed or variable home loans, please give me a call...  (07) 4723 8077

First Home Owners Grant – Current Status

by Dave Lamari
 
From the 1st of October to the 31st of December the first home owners grant will change to $14000 for a new home and $10500 for an established home.

It is anyone’s guess as to whether these will be extended after this.

The government’s current position on this is that both will simply drop to the original $7000 (i.e. the ‘boost’ will stop). 

If you have any questions please give us a call...  (07) 4723 8077

Just For A Laugh

A mother was working in the kitchen, listening to her five-year-old son playing with his new electric train set in the living room.

She heard the train stop and her son saying, 'All of You b*****ds who want off, get off now, 'cos we're in a hurry! And all of you b*****ds who are getting on, get on now, 'cos we're going down the tracks'.

The horrified mother went in and told her son, 'We don't use that kind of language in this house. Now I want you to go to your room and stay there for TWO HOURS.
When you come out, you may play with your train, but I want you to use nice language.'

Two hours later, the son came out of the bedroom and resumed playing with his train. Soon the train stopped and the mother heard her son say, "All passengers who are disembarking the train, please remember to take all of your belongings with you. We thank you for traveling with us today and hope your trip was a pleasant one."

She hears the little boy continue.

"For those of you just boarding, we ask you to stow all of your hand luggage under your seat. Remember, there is no smoking on the train. We hope you will have a pleasant and relaxing journey with us today."

As the mother began to smile, the child added..........

"For those of you who are pissed off about the TWO HOUR delay, please see the fat controller in the kitchen."

Interest Rates and The Economy

By Dave Lamari

There are many signs in the economy now pointing towards rates moving a little more aggressively than first thought.

The common belief is that this will be in the order of 1 – 1.5% in the next 12 – 18 months. The fixed rate movements are anyone's guess, but it is safe to say that if the variable rates are higher in 12 months, the short term rate son the fixed side will move accordingly.
 
Movements in variable rates have finally started and there are signs that this will continue at least in the short term (the Reserve Bank Governor is stating this quite clearly, rather than ‘double talking’ around it).
 
Fixed rates – These will follow (or lead) suit with Variable rates. These are not directly looked at by banks in line with Reserve bank moves, but rather moved as banks please and normally align with other banks in the interest on competitiveness.
 
Property and Rent prices – As with 18 months ago, there are signs that what effected rent and property prices back then (interest rate increases, inflation etc) are soon to re-enter the economy. This however does include a positive side. Rates are moving due to signs of a strengthening economy and with that normally comes better public sentiment and jobs growth (and maybe property price growth J).
 
Too Much Stimulus? - http://www.eurekareport.com.au/iis/iis.nsf/lpages/RWIE-7N92AE?opendocument 

Interest Rate Drop of 1%

How much does this take off my loan?
 
The reserve bank met yesterday and announced a further 1.00% drop to the official cash rate. At this stage two of the major banks have dropped by the full percent and the other banks are expected to follow shortly (otherwise they will miss out on a lot of work).
 
The most recent rates drop by the reserve bank of 1.00%, if passed on in full, will have a significant effect on a variable rate mortgage. Following are some estimates of just how much your obligatory repayment may change:
 
$200,000 loan - $166/month

$225,000 loan - $188/month

$250,000 loan - $208/month

$275,000 loan - $229/month

$300,000 loan - $250/month

$350,000 loan - $292/month

$400,000 loan - $333/month

If you have any questions please give us a call...  (07) 4723 8077

A $21,000 Government Gift for First Home Buyers

Breaking News...

Below is an excerpt from today's Government media release titled "$21,000 Boost for First Home Owners."

"The Rudd Government today announced a First Home Owners Boost to ensure first home buyers will be eligible for grants of up to $21,000."

Under the First Home Owners Boost:

• First home buyers who purchase established homes will have their grant doubled from $7,000 to $14,000; and
• First home buyers who purchase a newly constructed home will receive an extra $14,000 to take their grant to $21,000.

More than 150,000 first home buyers are estimated to benefit from the scheme.

First home buyers will be eligible for the First Home Owners Boost from today (14 October, 2008).

All contracts entered into by 30 June, 2009 will be eligible for this new additional assistance."

Click here for full report. (Link will open a new window)

Stay Calm

Even though there’s a lot of negative talk about (bad news is good news as far as the media is concerned), there’s no need to panic. I will even note that some of my recent blogs may seem a little ‘down’. They are written purely to inform.
 
In times like these (goodness, I sound like my Dad) you need to stay calm.  The most productive course is to increase understanding and stay informed. If your loan repayments for example are being met and you keep food on the table, there’s really nothing to worry about. You may seem like you’re standing still financially, but in any solid country, with a sound economy, you will get ups and downs and I would argue Australia is probably seeing more of a ‘sideways’.
 
Above all stay healthy and happy!

Rates Have Dropped, But Why?

Of late, interest rates have started to drop, but it isn’t for the best of reasons.
 
In today’s environment, the ideal cause for a drop in rates would be due to a slowing in spending (this in turn lowers inflation). However, even though spending has slowed slightly, inflation has held firm and is expected to hold for some time. The reason we are seeing a drop in rates is due to a slowing economy.
 
This may seem like it doesn’t really affect us everyday folk, but as an economy slows, businesses retract (less sales), their confidence drops and this in turn increases the unemployment rate (potentially harder to get a job). As an economy slows, the Reserve Bank lowers the ‘cash rate’ to help stimulate confidence and subdue slowing to avoid a nastier downward spiral.

Banks and the Yes, Yes, Yes.

It’s important to realize when you go directly to a bank, you don’t always get a straight shooter.

The mentality is often, ‘get em in, tell em yes and worry about the detail later’. It’s Sales 101… And it can cost you important time in the purchasing process.

The difference with a broker is that we don’t have a vested interest in writing your deal with any particular lender, we have a vested interest in you. As a result, we endeavor to find a bank that both suits your needs and has a suitable policy to get the approval. If there are any dramas, remember, I’m a firm believer in always ‘shooting straight’.

Rates Are Dropping, But Will We Receive Them?

As the Reserve Bank lowers the ‘cash rate’ the cost of funding has an inherent drop for the banks, which in the past has been immediately passed on (as when the cash rate had risen over the last few years).

The difference now is that banks, due to the ‘credit hoo-ha’ going on around the world, are less able, nor likely to pass on these drops in full.

The skeptic in all of us would suggest the banks are simply doing this to increase their yearly profit and I’m sure this is true to some extent (as no matter who the bank, they all seem to rise and fall simultaneously), but there is a real funding crisis going on at the moment, so I would suggest the ‘truth’ is somewhere in between.