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Gold Money - Secure, Physically Allocated Gold & Silver


Interest Rates  







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,

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.