Lending update – December 2019

Interest rates…how low can they go?

Sentiment is everything when talking interest rates and the month of November provided some interesting shifts in thinking by economists.  It now seems that both the market and the economists agree that the domestic economy is doing it tough and needs more help.

Reserve Bank of Australia (RBA) Governor Lowe was very forthcoming about what he believes needs to be done over the coming months to keep our economy moving.  Concerns around tight employment, low inflation and continuing slow growth domestically are forcing these decisions.

Interest rates remained on hold at the RBA’s December meeting and the Christmas break means the RBA will next meet on the 4^th February 2020. The market is predicting a further cut of 0.25%, taking the cash rate down to 0.50%.

The impact on lenders

The continued and increasing costs of doing business for lenders will restrict the amount of future reductions they pass on to borrowers. It is possible however, that we will see a 3.00% variable home loan rate (principle and interest) decrease to a 2.5% interest rate in the near future.  Fixed rates are already moving to these levels.

Competition between lenders is currently very high due to low business volumes. As a result, there are some competitive interest rate offers and rebates to attract refinancers.

With such significant shifts in interest rates over the past year, it’s important to ensure your lending solution and interest rate remain competitive.   Infocus Lending Advisory provides a complimentary Lending Health Check to help you understand if you are getting the best possible deal.  For more information, contact our office or your adviser directly.

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