Reserve Bank interest rate announcement – November 2014

Today the Reserve Bank of Australia met to review the official cash rate. They have decided to leave this rate steady at 2.50% pa. The official rate has remained unchanged for 14 months now. We expect that most lenders will leave their rates unchanged, in line with the Reserve Bank’s decision.

Getting the most from your home loan

The most important part of a good value home loan deal is the interest rate on repayments. Something to consider is whether you want a fixed interest or a variable interest loan, or a combination of both. Choosing between these often comes down to your personal financial situation and your expectation of future interest rates, and should be considered carefully.

In the current market, if your home loan rate is higher than 5% it would be worthwhile to look at all the available options. Harvest can assist you here. All you need is a copy of your most recent home loan statement and we do the rest. It’s that easy.

At Harvest we provide independent advice about home loans based on your personal financial situation. We do not provide the loans and we have access to 30 loan providers to make sure you get the best value home loan. As we only give advice, we don’t favour any particular lender, so we can tailor a package for you that meets all your needs.

Nov-best-rates-graphic

Outlook for Australian property prices and interest rates

Australian property prices have increased significantly over the last 2 years, in particular the Sydney and Melbourne markets. The Reserve bank has also been in the media concerning its interest rate setting and whether it should act to cool the property market down. This raises the question of what the outlook is for property prices and interest rates.

One important factor influencing the outlook for property prices is the Reserve Bank of Australia’s (RBA) official cash rate. This rate has been steady at a historically low rate of 2.5% for over 1 year and has been one of the key factors driving a strong lift in property prices in Australia (especially Melbourne and Sydney) over the last 2 years. Low interest rates enable people to borrow a higher amount which enables new purchasers to bid up property prices to higher levels. The graph below shows a sharp lift in housing loan approvals over the last 2 years which has strongly supported a lift in housing prices to date.

Housing loan approvals as at 31 October 2014

Housing-loan-approval-chart-GIF

The outlook for the official cash rate is a key part of determining bank home loan rates, which in turn, influences the outlook for property prices. Based on current market information, we expect that the official cash rate will remain unchanged at 2.5% for the remainder of 2014.

We expect that in 2015 the official cash rate may increase slightly over the calendar year. This expected modest increase is due to the Australian economy currently maintaining a moderate growth rate in the range 2-2.5% per annum. The key drivers of growth have been the property and banking sectors which are now performing quite strongly. The key restraints to growth have been a slowdown in the mining sector, a relatively high Australian dollar and relatively low consumer and business confidence levels.

Overall we expect property prices to stabilise at current levels over the next 12 months with the potential for a modest price increase or decline.

General Advice Warning – This Newsletter has been prepared for Harvest’s clients. The information contained herein is current and up to date at the time it was prepared.  Harvest Property Loans Pty Ltd, ABN 63 147 743 244, ACL 392 260. Harvest reserves the right to correct any errors or omissions.  Any advice contained herein has been prepared without taking into account any individual or company objectives, financial situation or needs. As such, before acting on any information contained herein, a person or company should consider whether the information is appropriate for them, having regard to their objectives, financial situation and needs. Rates quoted are subject to change at any time. © 2014 Harvest Property Loans.