How to make your mortgage work for you
Since Oct,2009 Reserve has increased 6 times its rate bringing the cash rate to 4.25%, the average variable rate borrower liked you and me are obtaining in the range of 6.71% to 6.81%, this inevitably puts enormous financial pressure for many people who has a mortgage over them. Australia rate movement is bold due to various factors such as: GFC is not totally over, Greece crisis is still lingering in the air causing global stock market to tumble in recent weeks. Beside, Australia is a country that is heavily dependent on exporting our resources to other countries and our local market is not big enough liked China to consume our own produced goods and services. Then why is Australia is the only developing country that keeps increasing its rate?
Many investors are unable to predict the rate movement liked an economist, but interest rate is directly affecting one’s return of investment, hence it becomes a sensitive area that any astute investors cannot afford to ignore. It's the "Million Dollar" question on the minds of all of us that have a mortgage... How high will interest rates go? In reality, nobody can accurately predict the interest rate à how fast and how high it will go. Dr Shane Oliver, a respected economist has shed some light on the subject. The major points he highlighted are:
The RBA has already increased the cash rate six times from its low of 3.00%, taking it back to 4.50%.
Most economists regard the normal or neutral rate to be around 5.75%.
Prior to 2008 the standard variable mortgage rate averaged 1.80% above the official cash rate. Now it is about 2.90% higher.
This would suggest that interest rates are now pretty close to normal.
However a counterview is starting to emerge, suggesting the normal level for the cash rate is actually around 5.50%.
On this basis the RBA still has quite a bit more work to do to return interest rates to normal levels and there might be another four or five interest rate rises to go!
Backing this up.... strong immigration levels and higher commodity prices are likely pushing levels back up to around 5.50%.
It is likely that the cash rate will rise above this level in 2011-2012 and we will see the cash rate top out at around 6.00%, or just above in 2012. Hence if bank lending margins remain at 2.90%, then the standard variable interest rate will top out at 8.90% in 2012. But as lenders offer discount and honeymoon rate etc, it will unlikely that you as the borrower will pay the full standard variable rate of 8.9%.
The interest rate has rise and Australia house price has increased. Many who are renting and not yet to become house owner clients are wondering shall they wait till interest rate rises further that causes house price to slide before entering the property market? Senior Finance Manager, Jenny Oh uses property growth chart to discuss the above topic.
Every investment has its risk. A successful investor will know the risk, willing to accept the risk while enjoying the return this investment class brings. As long one can assess and calculate the risk, any crisis will be an opportunity to get under valued assets. In my personal opinion, if you are yet to own the Australia dream of owning a house, you shall continue to hunt for your dream home.
The reason is if the property growth is 10% (conservative figure), a $400K house will give you an extra of $40K equity in a year. This growth (money) is something you get simply by just sleeping in your own house and bed. To ask one person to work another part time job or overtime to get this extra $40K on top of his yearly salary can be very challenging and tedious. Hence despite the house price has gone up, interest rate has rises, but if you are still a renter, you shall continue to hunt and look for the house you like and the areas you love to stay. In this way, you will not be missed out by another property boom in times to come and still be a “renter”. Capital Wealth Finance has one of the most competitive variable rate starts from 6.55% to turn your dreams into reality. In addition, we also have 2 years fixed at 7.19% to help you hike against interest rise.
Napoleon Hills said: “There are very little differences between one human being vs. the other; however this little difference can make a huge impact. The small difference is whether you are a positive or pessimistic person and the different outcome will be success or failure.”
If you are in a stable job or have some equity in your investment properties, you shall spend time to hunt for the next investment property, so that these assets can help you fund your retirement plan, maintain a decent lifestyle and enable you to achieve financial freedom giving you the choice to choose the type of lifestyle you want to live. Leo Biscayne also said: “if you are afraid of risks, you will do nothing so to avoid pain, sadness and financial loss, but you will not be growing and eventually be nothing”. Besides, by not doing anything you lose the opportunity cost and the time in the market to let your assets grow. A well located property will always grow in value. In the middle to long term time frame, it will be a good vehicle to help you curb inflation and create the wealth you need to fund your retirement lifestyle.
If you have any investment or finance related questions, please phone Jenny Oh on 0408798899 to book for an appointment or email her on joh@capitalwealthfinance.com.au, we are your wealth creation partner to turn your financial dreams into reality.
Many investors are unable to predict the rate movement liked an economist, but interest rate is directly affecting one’s return of investment, hence it becomes a sensitive area that any astute investors cannot afford to ignore. It's the "Million Dollar" question on the minds of all of us that have a mortgage... How high will interest rates go? In reality, nobody can accurately predict the interest rate à how fast and how high it will go. Dr Shane Oliver, a respected economist has shed some light on the subject. The major points he highlighted are:
The RBA has already increased the cash rate six times from its low of 3.00%, taking it back to 4.50%.
Most economists regard the normal or neutral rate to be around 5.75%.
Prior to 2008 the standard variable mortgage rate averaged 1.80% above the official cash rate. Now it is about 2.90% higher.
This would suggest that interest rates are now pretty close to normal.
However a counterview is starting to emerge, suggesting the normal level for the cash rate is actually around 5.50%.
On this basis the RBA still has quite a bit more work to do to return interest rates to normal levels and there might be another four or five interest rate rises to go!
Backing this up.... strong immigration levels and higher commodity prices are likely pushing levels back up to around 5.50%.
It is likely that the cash rate will rise above this level in 2011-2012 and we will see the cash rate top out at around 6.00%, or just above in 2012. Hence if bank lending margins remain at 2.90%, then the standard variable interest rate will top out at 8.90% in 2012. But as lenders offer discount and honeymoon rate etc, it will unlikely that you as the borrower will pay the full standard variable rate of 8.9%.
The interest rate has rise and Australia house price has increased. Many who are renting and not yet to become house owner clients are wondering shall they wait till interest rate rises further that causes house price to slide before entering the property market? Senior Finance Manager, Jenny Oh uses property growth chart to discuss the above topic.
Every investment has its risk. A successful investor will know the risk, willing to accept the risk while enjoying the return this investment class brings. As long one can assess and calculate the risk, any crisis will be an opportunity to get under valued assets. In my personal opinion, if you are yet to own the Australia dream of owning a house, you shall continue to hunt for your dream home.
The reason is if the property growth is 10% (conservative figure), a $400K house will give you an extra of $40K equity in a year. This growth (money) is something you get simply by just sleeping in your own house and bed. To ask one person to work another part time job or overtime to get this extra $40K on top of his yearly salary can be very challenging and tedious. Hence despite the house price has gone up, interest rate has rises, but if you are still a renter, you shall continue to hunt and look for the house you like and the areas you love to stay. In this way, you will not be missed out by another property boom in times to come and still be a “renter”. Capital Wealth Finance has one of the most competitive variable rate starts from 6.55% to turn your dreams into reality. In addition, we also have 2 years fixed at 7.19% to help you hike against interest rise.
Napoleon Hills said: “There are very little differences between one human being vs. the other; however this little difference can make a huge impact. The small difference is whether you are a positive or pessimistic person and the different outcome will be success or failure.”
If you are in a stable job or have some equity in your investment properties, you shall spend time to hunt for the next investment property, so that these assets can help you fund your retirement plan, maintain a decent lifestyle and enable you to achieve financial freedom giving you the choice to choose the type of lifestyle you want to live. Leo Biscayne also said: “if you are afraid of risks, you will do nothing so to avoid pain, sadness and financial loss, but you will not be growing and eventually be nothing”. Besides, by not doing anything you lose the opportunity cost and the time in the market to let your assets grow. A well located property will always grow in value. In the middle to long term time frame, it will be a good vehicle to help you curb inflation and create the wealth you need to fund your retirement lifestyle.
If you have any investment or finance related questions, please phone Jenny Oh on 0408798899 to book for an appointment or email her on joh@capitalwealthfinance.com.au, we are your wealth creation partner to turn your financial dreams into reality.
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