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ME Bank lifting rates 0.20%, others also

Discussion in 'Property Finance' started by Peter_Tersteeg, 29th Oct, 2015.

  1. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    ME Bank just announced they're lifting their variable rates by 0.20%, essentially following the major banks.

    BankWest also made a similar announcement earlier today 0.18% increase.

    At this point I think that there's not really much to run too. Plenty of smaller lenders have done nothing so far, but sooner or later they'll adjust their rates upwards. Even if they don't make a dramatic announcement, any lender can adjust new lending rates at any time simply by reducing the amount you can negotiate off.

    For what it's worth though, I've found that quite a few lenders who announced 4 months ago they were no longer negotiating on investment loans are coming back to the party. It's more dependant on volume and structure than before, but the banks are willing to give a little again. There's also been some signs that some lenders have realised they've overcompensated for APRA and are now tweaking their policies again, but more in favour of borrowers.
     
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  2. Waterboy

    Waterboy Well-Known Member

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    RBA board meeting on Tuesday. Would be interesting how they react to this.
     
  3. Perthguy

    Perthguy Well-Known Member

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  4. Mumbai

    Mumbai Well-Known Member

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  5. Perthguy

    Perthguy Well-Known Member

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    Yeah, I'm selling, so I want rates to go down.

    Then in a year I will be buying, so I will want rates to go up so house prices drop. :p

    I'm not asking for much! :D
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I'm not seeing much of an argument for the RBA to drop rates. The RBA has publically stated several times over the last year that they're concerned the property market is overheated and that dropping rates further is unlikely to help the economy.

    If they drop rates, they simply send a message to borrowers that borrowers rates will stay low, which isn't a message the RBA wants to send. It also encourages more speculative buying. If they leave rates where they are, the message is more likely to be that borrowers should be responsible with their lending decisions.

    It's a very narrow view and doesn't take into account foreign currency policy or the larger economy, but I think from a domestic lending perspective, it's in the RBAs interests to do nothing.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    You're probably right - and I suspect the RBA is more motivated by waiting to see the US Fed finally do some lifting .... that being said, housing construction is pretty much the only thing holding Australia's economy together at the moment and with GDP likely to barely pass 2%, stimulus around NEW construction will be needed soon enough. Tweaks to neg gearing which incentivise new dwellings, or NRAS 2.0, or both...or some other new dwelling incentives , might be closer than we think. Now I'm going to put my very very cloudy crystal ball back on the shelf , walk the very stressful 12 metre walk from my room to the white sands of Nusa Dua beach, beer in hand, and not give another thought to guessing what rates might or might not do, for a while at least :)
     
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  8. Redom

    Redom Mortgage Broker Business Member

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    The FSI did say that the RBA could adjust rates to compensate for higher capital levels. May well see it come into play here.

    The RBA board sit down and discuss the broader economy, housing related financial stability risks aren't front of the agenda. So far its been more of a cap holding the RBA back - i'm not so sure that exists so much now with APRA wielding some more power and a slowing Sydney market.

    Case for RBA dropping rates:
    • Inflation is subdued, even with a significantly lower dollar. No pressure to inflation from very weak wage growth.
    • Growth is slow, well below trend. Slow for the foreseeable future.
    • Employment forecasts aren't very strong with unemployment expected to remain in the 6% territory.
    • (The above three are the main things they'll look at).
    • Borrowing costs have just been raised in the midst of all of this.
    • A rate cut wouldn't actually do much, just return it to status quo.
    • Despite popular belief, plenty of room to cut rates.
    On the flip side, something you've eluded to Peter, the economic narrative over the past 12 months is that businesses aren't investing enough despite the low rates. The RBA's been investigating more behavioural type economics to explain this, citing factors like 'confidence' 'animal spirits' etc as factors influencing business investment decisions more so than the lower cost of capital.

    Until the data says something otherwise, rate cuts will likely happen. This month, next month...sometime soon i suspect. Good news for property investors!

    Cheers,
    Redom
     
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  9. Waterboy

    Waterboy Well-Known Member

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    Yeah that's why they're called Reserve. They stay on the bench and do nothing.
     
  10. albanga

    albanga Well-Known Member

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    This is my best Lyeton Hewitt "Come On" for a rate drop! I have 2 plasterers, 3 painters an electrician, plumber and chippy all at my place putting the finishing touches on my Reno before I sell it in 6 weeks time.
    A rate drop even though it may not be passed on I think will still stimulate some more agreesive buying.
     
  11. mja

    mja Well-Known Member

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    That's getting pretty close to Christmas time.