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All About Mortgage Interest Rates in Australia
One factor that plays the greatest part in determining how much demand
there is for housing is the interest rates of mortgages. If they rise,
people are deterred from purchasing a house. If you might do this,
many properties on sale are advertised at the
property finder,
homesales.com.au.
The part of the economy of Australia most affected by interest rates
is residential housing. Predicting the Reserve Bank of Australia's
(RBA) interest rate has now become almost a national pastime.
The RBA determines the official interest rate with reference to the
economy's condition at that moment. It considers inflation and other
key economic indicators such as unemployment. Interest rates have been
on a downward trend for over ten years. The official cash rate was
17.5 percent in January, 1990, but only 3.5 percent by September,
2012. There could be no better time for
property investments in Canberra or elsewhere. There are some
locations in Australia where it costs less to buy a house than rent
one.
Mortgage interest rates carry great weight. A change of a mere 0.25
percent could greatly influence the average person's mortgage
repayments. The RBA exerts less influence on mortgage interest rates
than you would think. Banks will rapidly pass on to customers any rise
in the RBA interest rate, but are not so likely to pass on a
reduction.
This February 2012, the RBA's interest rate was unchanged, but banks
increased rates for small business loans and mortgages, citing
external costs as the reason. The RBA cut its rate in June 2012, and
ANZ passed this on to its customers fully, but Westpac and
Commonwealth Bank failed to do so.
The rate of saving by Australian households has jumped from negative
two percent of household income prior to the global economic crisis to
about 10 percent. The interest rate would have to fall by a greater
amount to spark off more borrowing activity.
Wayne Swan, the treasurer, said customers would grow angry if banks
did not pass on reductions in the RBA interest rate to customers, and
the more this came to pass, the better would be the effect on the
economy. Banks, he said, were very profitable, and experience a return
on equity that is one of the highest in all the world. Tony Abbott,
the opposition leader, said that banks disdained Swan's call because
he was “a weak treasurer.”
The interest rate is used by the RBA to manage monetary policy. An
overheating economy will cause inflation, so in such an instance the
interest rate is raised, restraining spending by citizens by raising
the cost of mortgage repayments. The happenings described above call
into question monetary policy's very effectiveness.
You can, at least, benefit financially from fluctuating interest
rates. Last year, the online betting company, Centrebet, was granted
permission by the Australian Securities and Investments Commission to
take bets on interest rates. A prior venture by the company into this
field was brought to a halt by the Commission because it was
delivering a financial service when no licence was held, and the
Commission threatened to close the company down. Centrebet boasts
60,000 customers, and became the first Australian company to provide
online betting in 1996.
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