Unless you’ve been living under a rock recently, you would have noticed that interest rates have fallen to record low levels.
In fact, as of July 2019, the official cash rate is a mere 1% after cuts by the RBA in both June and July. So what’s going on, and how do interest rates affect me?
RBA Governor Phillip Lowe recently reiterated that the Reserve Bank remains committed to its expansionary monetary policy stance to support the “ailing economy.” Essentially, the two main concerns are stagnant wage and economic growth. Wage growth has been very modest because the participation rate (percentage of people working or actively looking for work in the labour force) has surpassed the RBA’s expectations. The ongoing US-China trade tensions, the property market downturn and soft household consumption due to large household debt, have all hindered the Australian economy recently.
In addition to the interest rate cuts, one of the bodies that regulate banks and home loans, APRA has loosened one of the tests that banks must apply when considering home loans. In layman’s terms, you can now be eligible for a larger loan amount, thanks to the relaxation in regulations.
This is great news for mortgage holders as there has never been a better time to find a deal on your home loan and with the help of brokers the process to refinance your existing home loan can be painless. There are even rates for certain borrowers below 3%! If you would like help in getting this process started, you can contact our Financial Wellness team using the link below.
On the other hand, the news is not so rosy for retirees and others who rely on savings interest for income. Canstar revealed that the CBA’s savings account interest rates had dropped to 0.15%, equating it with ANZ and Westpac’s rates. NAB dropped theirs to a mere 0.11% on its iSaver account. It’s a reminder to be vigilant and actively search for a better savings deal. Given the inflation rate is still meandering at 1.3%, you’re effectively losing money in real terms with those aforementioned savings rates.
If you’re interested in saving money on your home loan or are looking to take out a new loan, click on the link below and an Employment Hero mortgage expert will be in touch with you shortly!