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jeremy fisher

Interest rates at a record low for 11 months

jeremy fisher
Jeremy Fisher 7 minute read

Over the last 25 years, a key indicator of interest rates, the Reserve Bank of Australia’s cash rate, has fluctuated between 2.5 per cent and 17.5 per cent per annum.

Since August 2013, the rate has remained unchanged at its record low of 2.5 per cent, and although it might move slightly, it should remain steady for the rest of the year.

The Reserve Bank of Australia alters interest rates with the aim of achieving its target levels of sustainable growth in both demand and inflation. Since the start of 2014, growth has become firmer with moderate growth in consumer demand as well as a strong increase in housing construction. Property prices have increased significantly over the past year, rising an average of 10.9 per cent across Australian capital cities from March 2013 to March 2014, according to ABS figures. However, there are some signs of a moderation in the pace of the recent growth.

The governor of the Reserve Bank, Glenn Stevens, announced that the current monetary policy should support demand and help strengthen growth whilst keeping inflation consistent at 2-3 per cent over the next two years. The board recently announced, “Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the board judged that the current accommodative stance of policy was likely to be appropriate for some time yet.”

If rates were to drop further, brokers would have a valid reason for letting clients know that there were incentives to fix their rates – but as it is likely that they will remain stable, and possibly rise, brokers should work smarter during this time. At all times of the year and in all economic conditions, brokers should work smart to retain clients, build client referrals and maintain a good level of communication with both existing and potential clients.

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Consumers have the option to fix their interest rate for a set period of time such as one, three or five years. By fixing the interest rate, any changes made by the Reserve Bank would not affect the regular repayment amount. With rates probably rising in the longer term, consumers who fix rates now would prevent their rate from rising during the fixed period – but it is also important to consider that if rates were to drop, consumers would still pay their fixed rate, which would be relatively higher.

 

 

Interest rates at a record low for 11 months
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Jeremy Fisher

Jeremy Fisher

Jeremy Fisher, director and founder, 1st Street Home Loans

Jeremy Fisher is one of the most awarded mortgage brokers in the industry and winner of the Australian Broker Association’s prestigious ‘Australian Broker of the Year’. Since 2001, Jeremy has settled in excess of $750 million worth of property loans and delighted clients with exceptional results and highly personalised service.

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