Cash Rate Decision Reduces Spring in Borrowers’ Steps
Over the festive season, prepare for the first rate rise
The Reserve Bank of Australia (RBA) has lifted the cash rate by 25 percentage points to 3.25%, after keeping it steady at a 49-year low for five consecutive months. It is expected to increase again shortly due to Australia’s resilient economic environment.
Borrowers, especially those with a home loan, need to be prepared. Improving consumer and business sentiment and spending makes it very likely that the second official rate rise since March 2008 will occur within the next few months.
Australia’s largest independently-owned mortgage broker, Mortgage Choice urges borrowers to take ownership over their mortgage situation.
Senior corporate affairs manager, Kristy Sheppard said, “Borrowers should prepare themselves for a festive season featuring higher mortgage repayments and know where to look for signs of upcoming interest rate movements.”
“They should be cautious of further mortgage rate rises because many of Australia’s lenders are not shy about moving interest rates independently of the RBA cycle.
“Borrowers need to be very aware that competition in the lending industry has reduced significantly thanks to the financial crisis and some say this is having an effect on the pricing of mortgage products.”
Signs that consumers should watch for to indicate the interest rate could move:
• Speeches and presentations by the RBA governor and representatives
• Articles written by economists and market commentators
• Employment trends and jobs data
• Retail and motor vehicle sales data
• Housing, personal, commercial and leasing finance data
• Consumer and business sentiment
• Business and trade investment data
• Government borrowing and spending
• Consumer surveys results
• Global economic trends
• Lenders’ fixed rate movements (pricing in future rate rises)
Mortgage and property industry email newsletters, online articles and newspaper sections are also a convenient and useful means of becoming more informed about both markets.