As the holiday season rapidly approaches, the Reserve Bank of Australia (RBA) met today for its final meeting of 2018. As expected, they have elected to keep the official cash rate on hold at 1.5%, where it will remain until their next meeting on February 2019. This is the 27th meeting in a row where the RBA has left rates unchanged. Comments from the RBA last month indicated they would wait to review this quarter’s economic data before considering a rate adjustment, and it seems likely that it will be some time away. Meanwhile, home values and auction clearance rates continue to slide in most markets – it could be a great time to grab a bargain if you’re looking to buy a home.
Auctions / clearance rate
Monthly Home Values
|VIC||1514 / 46%||▼ -0.97|
|NSW||1116 / 49%||▼ -1.43|
|ACT||105 / 50%||▲ 0.63|
|QLD||286 / 37%||▼ -0.02|
|WA||57 / 40%||▼ -0.74|
|NT||2 / 0%||▲ 0.71|
|TAS||7 / 100%||▲ 0.70|
|SA||154 / 42%||▲ 0.06|
If you want to cut down on spending and prefer not to analyse your expenses on a regular basis – another tip is to work out your expected costs each month on essentials such as groceries, electricity, rent, dining etc., plus a marginal buffer and on the day you are paid, leave this amount in your day to day bank account and transfer the rest to a high interest saver or offset account. Ensure you don’t have debit card access to the high-interest saver account, just internet banking so it’s harder to access. That way you restrict your access to excess cash each month, helping you to save.
We’ve seen clients who have used this method of budgeting take it one step further by having their employer split their pay into two separate accounts for them. That way they don’t even see the surplus income hit their day to day account.
However, you do it if you’re planning to borrow any funds in the next few years, expect lenders to request your expenses. And if it doesn’t meet their assessment of your expected expenses, they’ll be asking you to provide three months bank statements evidencing your declared expenses if you’re not an existing customer. If you are an existing customer, they’ll be reviewing your accounts internally themselves and can possibly decline applications if your declared expenses don’t match your transaction history. So planning is the key, no one likes to budget but it’s important to understand your cash flow.
We’re still seeing super competitive fixed rates and with a number of economists predicting at least one rate rise in 2018, it might be an appropriate time to fix some or all of your current loans. If you do consider fixing, however, remember that you are penalized if you are payout or refinance a fixed rate during the fixed-rate period. This is called paying a ‘break cost’ and is calculated on a number of factors including the remaining term of the fixed loan and variable rates at the time.
Generally speaking, you can’t have a full offset account against a fixed rate and you are limited to the amount of additional repayments you can make each year. Additional repayments can’t be accessed during the fixed-rate period either. In addition to the fixed rates, we’re seeing some very competitive variable rate options, especially if you opt to pay principal and interest along with cash rebates to help cover the associated costs of refinancing, which are usually around the $1,200 mark.
If you would like to discuss whether fixed rates are suitable for you, ensure your current rates are competitive or check if your current loan structure best suits your needs please contact me to review your options.
0412 210 099
Stoneturn Pty Ltd
Level 21, 25 Bligh Street, Sydney NSW 2000
T: 02 8256 3109 E: email@example.com
Note that specialist Accounting, Property, Mortgage and Foreign exchange services offered by our partners, Stoneturn, OFX, Hartley’s and LJ Hooker are via referral arrangement only. Note that these Firms are not authorised by NEO Financial Solutions Pty Ltd and therefore NEO Financial Solutions Pty Ltd and Australian Expatriate Services are not responsible for any advice/services provided by these Firms.