Do interest rates have further to fall?

Philippe's comment:

What a great time to be a property investor!

I’ve been in the mortgage industry for well over a decade and I must say, I’ve never seen borrowers pay less for their mortgage than they do right now.

As you know by now, the Reserve Bank decided to cut interest rates again in August, as largely anticipated on the back of weak inflation results. I predicted this would happen in December last year, although I’m not giving myself too much credit – many other experts in the industry also suggested that a similar run of rate cuts would be on the cards.

However, I also predicted that the full rate cut wouldn’t be passed on to consumers, and wouldn’t you know it: most major banks have only passed on around half of the rate cut, some even less.

Back then, I warned:

“A 25 basis point decrease delivered by Glenn and co. could become an opportunity for them to reinforce their balance sheets, rather than reward customers.”

This is precisely what has happened – but after APRA legislation forced them to reign in their investment lending books, can you really blame them?

Besides, let’s focus on the good news!

If you have a variable loan, your mortgage interest rate has been reduced. It’s now quite possible that you’re paying the lowest amount you’ve ever paid for your home loan in your lifetime. This is something to celebrate!

Where interest rates are headed from here is going to be interesting.

Already, NAB is predicting another two rate cuts in 2017.

“With inflation forecasts still very low and the RBA showing its hand as a committed ‘inflation targeter’, it is seemingly less worried than we thought about using up some of its valuable remaining monetary policy ammunition, so the case for further cuts from the RBA appears to be mounting,” says NABs chief economist, Alan Oster.

He forecasts “two more 25-basis-point cuts in May and August 2017 – to a new low of 1 per cent – which should be enough to stabilise the unemployment rate, currently a concern for the RBA at just over 5.5 per cent.”

Despite this environment of mortgage interest rates that continue to decrease, a number of consumers are opting to fix their rates. I can definitely see the appeal ¬– banks are in fixed-rate home loan ‘blitz’ at the moment, offering many fixed products with a coveted ‘3’ at the front.

In fact on August 2, Westpac announced that they would reduce their mortgage fixed rates down to:

2-year rate – 3.75%
3-year rate – 3.85%

While these are certainly some of the lowest fixed rates we’ve seen on offer from a Big 4 bank, they’re not the lowest rates in the market. Many other boutique banks and non-bank lenders are offering rates as low as the 3.6% range!

Obviously for investors and homeowners, this is all positive news, as there’s never been a better time to negotiate for a better deal on your mortgage. For a personal review of your loans and an obligation-free

chat about how we may be able to help you save money on your mortgage, call us today on 1300 266 350.