Bruce's Blog
RBA and finance report Sept 2011
Wed, Jun 8th 2011, 09:28The RBA has decided to hold the cash rate for now.
Their accompanying comments acknowledge a softening in many areas but still warning of potential inflation. Having it both ways!! (see Attachment)
WHAT ELSE HAS CHANGED SINCE MY JUNE/WINTER EMAIL?
The RBA cash rate is at 4.75% but 90 Day Bank Bills futures (which should lead the RBA) have eased further with March 2012 at about 3.5%. That’s a gap of 1.25%!!
Same for 3 and 10 year bonds yielding 3.8% and 4.4% respectively.
Then there is China to save us and cause the rates to rise?
In the market, the lenders have clearly shown the way they think rates may move by offering discounted rates for both variable and fixed rate loans. This is an effort to boost their volumes at the expense of other lenders as overall demand for borrowing has reduced.
The banks have been able to access cheaper money from domestic and overseas sources (official rates in Japan and USA are near zero) and have used this particularly for fixed rate offers for 2-3 years which are below current variable rates. This way they can also lock in customers and if borrowers wish to get out early they still have to pay a break fee.
Although early exit penalty fees have been abolished, existing loans settled before 1st July 2011 still fall under the old loan conditions.
The direction of fixed rates tend to point the way for variable rates and during the last cycle they fell to 3.99% for some lenders before moving back up.
Regardless of the positive talk of China’s growth supporting Australia’s future, many people feel less certain of their own future and we have seen a cutback in discretionary spending and more to savings.
In this environment, our safest course of action is to take up the Boy Scouts’ motto
BE PREPARED!
- Focus on overall debt reduction
- Restructure finances to get the best financial base from your existing equity
- Take advantage of the current discounted rate offers
- Review your protection for life, accident or loss of income
- Be financially ready to take advantage of the great investment opportunities which will arise over the next few years
Perhaps with property values holding or getting a slight lift in the Spring market, now is the time to take action to lock in your equity, restructure your finances and at the same time take advantage of our Debt Reduction and Wealth Creation program.
Look forward to hearing from many of you. Let us review your current finances and present some options.