Last week the Reserve Bank dropped the Official Cash Rate by 1.00% to 6.50% and immediately banks decreased their mortgage rates.
The best rates out there today amongst the major banks are 7.95% for six months and 7.90% for 1 Year (forget anything past 1 Year).
What excites us is to finally see a bit of competition amongst the banks. Bank Economists did everything they could to talk mortgage rates up, but competition along with the “Government Guarantee” were the winners on the day!
With tight credit criteria restricting any appetite for borrowing there is room for further rate cuts leading into XMAS and in the New Year. Six months ago we thought rates would not fall as far as the last recession when we saw rates get as low as 5.70%. Increasingly our view is that we might just see a rate with a 5 in front.
Our interest rate view at the moment is to not fix until the settlement of your property is near and to fix for six months or 1 year at the maximum. The next OCR is 4th December and we are likely to see another rate decrease although of a smaller magnitude (50bps.) Ended up being 1.50% – wow!
If you are looking at property now then you can expect to get an initial mortgage rate of around 7.50% for the first six months and then 6.75% when you refix six months later.
Although rates are dropping quickly, do not expect to see lots of buyers out there over the Summer because of tight credit criteria. A 10% deposit is almost manditory, everyone is spooked, and property investors cannot leverage off the back of lower property prices. If you can afford to borrow then the next 6-18 months will be good buying. You will never find a great deal if you don’t ask!
