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Guest posted a topic in Financial Advice: Ask VistaSo late yesterday (after I finished my other post, naturally) Westpac announced it will be increasing rates by 0.14% p.a. quoting increased wholesale funding: In particular the bank bill swap rate, which is a key wholesale funding rate for mortgages, increased by about 25 basis points between February and March this year and has remained elevated. “We initially hoped that this increase would be temporary, and therefore we have incurred these costs over the last six months. The rate changes announced today will not recover these costs..." - Official Westpac Media Release, 29 August 2018 I.e we didn't increase them then, but we are now, and not by the full amount needed cover costs. Interpret that as you may. So the big question is when/if this will cause a domino effect with the other big banks? There have been rises in smaller banks but none of the big four, perhaps due to the target already firmly on their backs as a result of the Royal Commission. Will they follow suit hoping that Westpac will take the first wave of anger and disapproval? Or will they stand fast in an effort to claw back a little customer sentiment? (Along with some nicely crafted marketing giving themselves a cheeky gold star of course). No doubt we will find out shortly. Bottom line, the only real way to guarantee your rate and repayment is to be on a fixed rate, but they come with restrictions - so do you homework first to see if it is right for you. As I have already mentioned elsewhere rates are so low at the moment that when they eventually go up again it will be a shock to the system for many that have only ever known low rate environments. So prepare yourselves. Those of the era of double-digit interest rates know what I mean. The RBA knows it too and have flagged rising rates as something to prepare for. Some economists now argue this recent move by Westpac (and potentially by others) may now delay any increase decisions by the RBA. Time will tell.
Low and behold, at its meeting today, the Board decided to leave the cash rate unchanged again at 1.50 per cent. Some interesting parts of the media release, or you can read the full version here: "In Australia, money-market interest rates are higher than they were at the start of the year, although they have declined somewhat since the end of June. These higher money-market rates have not fed through into higher interest rates on retail deposits. Some lenders have increased mortgage rates by small amounts, although the average mortgage rate paid is lower than a year ago." Indeed, some lenders have started to creep up mortgage rates slightly quoting higher costs - the true reasons for doing so is anyone's guess, as they are unfortunately able to alter rates independently of any RBA decision. An old abandoned interest earning account is still at 0.01%, however. "Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Housing credit growth has declined to an annual rate of 5½ per cent. This is largely due to reduced demand by investors as the dynamics of the housing market have changed. Lending standards are also tighter than they were a few years ago, partly reflecting APRA's earlier supervisory measures to help contain the build-up of risk in household balance sheets. There is competition for borrowers of high credit quality." Tightening in lending criteria is certainly evident as the industry rushes to ensure compliance as auditors and regulators get the fine tooth comb out. Quite heavy in the investment lending side of things yes, but for owner occupiers or those moving into investment properties, be prepared to show the bank proof that you actually live there. A few lenders have started to enforce this for any product switches; what suffices for evidence varies between lenders. Speaking of big brother, keep an eye out for random acts of 'kindness' from your super company as Round 5 hearings of the Royal Commission looks at the super industry. What a pleasant surprise that my super company refunded me some administration fees they 'accidentally' charged... "Sorry we robbed you - here, have it back". And last but not least from the RBA media release: "One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high. The drought has led to difficult conditions in parts of the farm sector." The impact of drought or any other financial hardship can be massive on those families affected by it. When you are scraping for pennies everything else is also just that little bit harder. If you are affected by drought or struggling with money call your bank and ask to speak to the Hardships Team. Every lender has one - ask how they can help. Or, call the National Debt Hotline 1800 007 007 or research your options - Money Smart has some great information here. And of course, please look after your health, mental and physical. If you or someone you know is struggling financially it is ok to ask for help. https://www.lifeline.org.au/get-help/topics/financial-problems