Hello [subscriber-firstname] and welcome to my November Newsletter
Exciting New Product - Capped Rate Home Loan
For those caught with the difficult decision of whether or not to fix the interest rate on their home loan, there is a new product from Bankwest which combines the benefits of both fixed and variable rate products. Called the Capped Rate Home loan, the major advantage is that once the variable rate on the product - 5.65% curently (plus latest RBA increase when passed on) reaches the Capped Rate - 7.5%, the interest rate will not go any higher. This means you get the best of both worlds - a relatively low variable rate (for the time being) with the security of knowing your rate will not go through the roof as the RBA lifts the cash rate in the months ahead. The capped rate stays in place until November 2012 and then reverts to the prevailing variable rate.
This loan is available for personal borrowers only (fully income verified), for the purchase, re-finance or construction of an owner occupier or investment residential property. For more details on this product, please give me a ring or simply reply to this email.
Property Outlook
A report in the Mortgage Business Magazine last month quotes research from BIS Shrapnel which suggests house prices will rise by nearly 20 per cent in the next three years. The rise would add more than $100,000 to the average house price. According to an article in The Herald Sun, BIS Shrapnel found that house prices will rise by 3 per cent this financial year and 8 per cent in each of the following years. The research, conducted on behalf of QBE Lenders' Mortgage Insurance, said the shortage of dwellings and soaring population were combining to create the perfect environment for property investors. "Upgrader and investor demand is expected to gather momentum and take over as the main drivers of the housing cycle," QBE chief executive Ian Graham said.
In response to the Melbourne Cup Day rate increase, the Housing Industry Association (HIA) has claimed the Reserve Bank's decision to raise rates for the second consecutive month should not make a large material difference to housing demand. According to HIA's chief economist Harley Dale, figures show that sentiment towards buying new homes begins to falter when mortgage rates hit their 10 year average of 7.25 percent. Even with the latest rate rise, the variable rate on the average mortgage is still well below that mark, he said.
Interest Rates - RBA begins the long road back to neutral
Having recently described the Cash Rate of 3 percent which prevailed from April to October this year as an "emergency setting" designed to keep the economy out of a deep and protracted downturn, the Reserve Bank has begun taking the first steps to return monetary policy back to a more neutral or normal setting. The ANZ Bank Australian Markets October Report said the first phase is the removal of the emergency policy setting and is likely to involve three further 25bp rate hikes spanning the upcoming summer period. The second phase will be a move in the cash rate back to a genuinely neutral setting, above 5.00%. The report anticipates the economic conditions for this phase will not be in place until 2011. "We therefore expect an extended pause in the monetary policy tightening cycle throughout much of 2010" it said.
Along similar lines, the National Australia Bank's (NAB) monthly business survey and economic outlook in October stated the official cash rate is forecast to hit 5.5 per cent by the end of 2011. Following the RBA's decision to raise rates by 25 basis points in October, NAB has altered its rate forecast to include another 50 point increase before the end of this year (half of that being delivered on Cup Day). While the bank has decided to change its immediate forecasts for 2009, it has left its longer term rate prediction unchanged however at 4.25 percent by the end of 2010 and 5.5 percent by the end of 2011.
In real terms this means we will be paying around an extra 2 percent above our current variable rates by that point.
Time to Review Your Risk Cover?
I now have access to an approved Insurance Specialist - Glenn Adams from Investor Insured - who can provide a competitive quote for all your insurance needs eg Life Cover, Trauma, Income Protection etc. If you haven't reviewed your insurance situation for some time I can arrange for Glenn to conduct a no cost/no obligation review of your current insurance to ensure you have the right cover for your circumstances. This assessment would be of value if your insurance is linked to your superannuation, if you are not sure what level of cover you have or if you haven't considered risks beyond basic life insurance.
Please click on the Investor Insured link on the side panel to enter your details and I will arrange for Glenn to contact you.
