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Prepare for Rate Rise or Risk Needing a Second Job
7 October 2009 |
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| Leading banking comparison site Infochoice.com.au has warned many Australians are inadequately prepared to cover the rising costs of home loan repayments following the anticipated return to more ‘normal’ interest rate levels in the coming months.“We may be enjoying near 20 year record low interest rates at the moment, but if you listen to the RBA, the government, economists and most importantly the banks, a return to higher interest rate levels is almost guaranteed, and soon,” said InfoChoice CEO Shaun Cornelius.According to Mr Cornelius, future rate rises will have a significant impact on consumer bank balances, some of whom may be forced to take drastic measure to save their homes.“In the case that your current financial situation does not allow for rate increases you could end up in a position where you would need to earn an extra $17,000 per year (before tax) to cover the extra repayments on a $500,000 home loan,” Mr Cornelius said.“Consumers must plan ahead now to avoid having to take on a second job or even worse, losing your home,” he said.Cornelius cautions that when it comes to interest rates, what goes down must also eventually come up.“While many home loans are currently offering rates as low at five per cent and sometimes even lower, consumers mustn’t forget that just 18 months ago similar home loans charged around 8.50 per cent,” he said.“While those with an average home loan of $300,000 are currently $662 per month better off, these low rates will not continue. Key indicators point to increases starting as early as next week Tuesday when the RBA meets.”Mr Cornelius reminds consumers that while official rates may not rise significantly in the immediate future, actual Home Loan rates are not directly tied to RBA cash rate changes.Over the past 12 months, RBA cash rate decreases have pre-empted proportionately less decreases in actual home loan rates. While the RBA cash rate has decreased by 4.25 per cent since March 2008, average home loan rates offered by the Big Four have reduced only 3.84 per cent.“The banks argue that their true cost of funds is influenced by other factors, as they rely on wholesale funding,” said Mr Cornelius.“If this holds true, there is a strong chance that a small increase in the RBA cash rate will result in a significantly higher increase in actual home loan rates charged by the banks.“I would not be surprised to see a 0.25 per cent increase in RBA rates next week translate into a 0.50 per cent rise in actual bank rates. Even if the RBA does announce a rate decrease in the coming months, I suspect the banks will increase rates regardless,” he said.“The big question is whether Australians are ready and able to deal with a two to three per cent increase in home loan rates.”According to InfoChoice figures, a three per cent increase in interest rates will translate to extra repayments of $561 per month on a $300,000 home loan, and an extra $936 on a $500,000 loan.InfoChoice advises consumers preparing for interest rate rises to follow three simple rules.* Minimise your home loan balance by paying off as much as you can (over and above your minimum monthly repayments)* Consider re-financing. If you are paying more than 5.50 per cent on your mortgage, you can probably get a better deal somewhere else.* Keep track of the interest rates on your mortgage as well as other offers available by visiting online comparison sites such as Infochoice.com.au. |
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| Source : Infochoice.com.au |
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| 30 October 2009 | - NAB could move raise rates up |
| | - ANZ backs away from no rate rise commitment |
| | - Westpac says: talk to our branch manager |
| | - Banks to pass on regulation costs to customers |
| | - Indian banking team opens doors |
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| 29 October 2009 | - Investors flock to property but fear rate rises |
| | - NAB slugs borrowers |
| | - House prices boom again |
| | - Land prices go up |
| | - Hot property investment locations named |
| | - ANZ lives in your world |
| | - 0.25 per cent rate rise coming next week |
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| 28 October 2009 | - Switch banks and save $4,300 |
| | - Credit Unions have cheapest personal loans |
| | - Westpac says rates may have to go up |
| | - Customers rate ANZ the favourite bank |
| | - Personal loans a good alternative to cards |
| | - High income earners like Westpac |
| | - Commonwealth upgrades Netbank |
| | - Netbank gets better for business |
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| 27 October 2009 | - Big banks can’t rule out big rate rises |
| | - MacBank to sell Bendigo home loans |
| | - We lend responsibly say ANZ |
| | - Home buyers fear missing out as prices soar |
| | - Climate change threatens homes |
| | - Suncorp term deposits promise higher returns |
| | - Business turning against NAB |
| | - Your info is safe say banks |
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| 26 October 2009 | - ANZ rules out rate increases |
| | - Big banks raise fixed rate loans |
| | - Melbourne boom to push rates up |
| | - Amazing Melbourne auction results continue |
| | - Customer info being sent overseas |
| | - Bank investors brace for earning season |
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| 23 October 2009 | - Make your money work for you |
| | - Rates could hit 10% in 2 years |
| | - Big banks bounce back |
| | - First home buyers - get your loan application done |
| | - ME bank opens more Melbourne branches |
| | - Scam phone survey targets bank customers |
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| 22 October 2009 | - House prices to double |
| | - RBA divided on rate rises |
| | - Rate tipped to rise by 0.5 per cent |
| | - Bendigo most popular bank |
| | - South West Credit open for lending |
| | - Pub/club ATMs to give limited cash |
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| 21 October 2009 | - Contactless cards cause confusion |
| | - Online brokers cut prices |
| | - ANZ puts retirement bankers in every branch |
| | - Low interest loans get a boost |
| | - PayPal card coming soon |
| | - Bank guarantee needs to end |
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| 20 October 2009 | - Term deposit rate tactics vary |
| | - Vendor boost attracted 60,000 more buyers |
| | - Customers generating cash |
| | - Deposit takers slow to pass on higher rates |
| | - Split rates decision at NAB |
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| 19 October 2009 | - one direct scrapped by ANZ |
| | - UBank: the last of the big bank online brands |
| | - Wave to pay |
| | - AMP wants fewer shareholders |
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| 16 October 2009 | - Seven more rate rises coming soon |
| | - NAB opens the door to big rate rises |
| | - Consumers prefer eftpos to credit |
| | - NAB abolishes monthly account fees |
| | - Time for a new transaction account? |
| | - Other banks reject more fee cutting |
| | - NAB playing catch up in deposit market |
| | - Bank of Queensland has big ambitions |
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| 15 October 2009 | - Home loan borrowers go back to basics |
| | - Borrowers turn against fixed rates |
| | - Voiceprint coming to NAB online bank |
| | - Banks to know everything about you |
| | - Your credit file is about to get screened |
| | - Pay with a wave at IGA supermarkets |
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| 14 October 2009 | - Don’t get caught out with interest rates increases |
| | - 20 per cent struggling with repayments |
| | - Aussie John says check your rates |
| | - NAB customers hit by computer problem |
| | - St George on go slow |
| | - Fake mortgages net millions |
| | - Community banking celebrates birthday |
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| 13 October 2009 | - St George launch savings account for Gen Y |
| | - Demand outstrips housing supply in NSW |
| | - First home saver accounts a fizzer |
| | - Small business to get financed |
| | - All deposits are guaranteed |
| | - Gen Y shares cash but can’t save it |
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| 12 October 2009 | - Extra credit card benefits without the extra cost |
| | - Innovative mortgages signal change |
| | - Average repayments to rise by $375/month |
| | - Westpac deposit rates hit new high |
| | - RAMS adds extra to rate rise |
| | - Sydney auctions bouncing back |
| | - ANZ cuts more account fees |
| | - CBA selling women’s diary |
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| 09 October 2009 | - Mortgage repayments to rise by $355/month |
| | - Rates rise across the board |
| | - Cards and business loans go up |
| | - Banks boost online savings rates |
| | - CBA says do you need a loan extension? |
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| 08 October 2009 | - Rate Rises - what are the major lenders doing? |
| | - Rate rises: CBA refusing to go first |
| | - CUA tops customer satisfaction survey |
| | - Investors sense the bottom of the market |
| | - Upgraders, investors replacing first home buyers |
| | - CUA losing members |
| | - Mortgage competition gone out the window |
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| 07 October 2009 | - Mortgage rates set to rise |
| | - Term deposit rates at record highs |
| | - Time to end low interest rates says Stevens |
| | - Homeowners to pay $50/month more |
| | - Many more rate rises to come |
| | - Complaints soar about mortgages and margin loans |
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| 06 October 2009 | - Less competition in banking |
| | - Auction continue to deliver results |
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| 02 October 2009 | - Banks deny rate rise plans |
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| 01 October 2009 | - CUA think pink to support breast cancer research |
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