RBA increases cash rate to 1.35%
At its July board meeting, the Reserve Bank of Australia (RBA) lifted the cash rate target by 50 basis points, in line with market expectations, bringing the official cash rate target to 1.35%. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25%.
This marks the third month in a row that the RBA has raised rates, with further increases expected over the course of this year as the central bank seeks to contain rising inflation. The third back-to-back rise follows an increase of 50 basis points in June – the largest increase since February 2002 – and 25 basis points in May. May’s increase was the first since 2010, as the central bank lifted the cash rate from its record low emergency level of 0.1%.
Global inflation is high
Global inflation is soaring. It is being boosted by COVID-19-related disruptions to supply chains, the war in Ukraine, and strong demand which is putting pressure on the capacity of production. Although monetary policy globally is responding to this higher inflation, it will be some time yet before inflation returns to target in most countries.
As part of the response, rate hikes are happening across the globe. The aim is to slow down economies and bring supply (production) and demand (spending) back into balance to address the soaring inflation rates. Nearly all central banks across the globe are lifting rates from ‘emergency’ levels to reflect more ‘usual’ functioning economies because of this.
In a statement from the RBA, Governor Philip Lowe had this to say on inflation in Australia:
“Inflation in Australia is also high, but not as high as it is in many other countries. Global factors account for much of the increase in inflation in Australia, but domestic factors are also playing a role. Strong demand, a tight labour market and capacity constraints in some sectors are contributing to the upward pressure on prices. The floods are also affecting some prices.
Inflation is forecast to peak later this year and then decline back towards the 2–3% range next year. As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services. Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.”
How COVID-19 and the war in Ukraine is driving inflation
An important factor to note in all of this is COVID-19. Workers are continuing to contract the virus and are forced to stay at home, resulting in fewer goods and services being produced. But economies are continuing to recover from the virus, with spending lifting. Unfortunately, spending is recovering more quickly than production. The other key factor is the war in Ukraine, driving up energy and food prices across the globe.
The Australian economy is resilient
In the statement from the RBA, Mr. Lowe commented on the Australian economy:
”The Australian economy remains resilient and the labour market is tighter than it has been for some time. The unemployment rate was steady at 3.9 % in May, the lowest rate in almost 50 years. Underemployment has also fallen significantly. Job vacancies and job ads are both at very high levels and a further decline in unemployment and underemployment is expected over the months ahead. The Bank’s business liaison program and business surveys continue to point to a lift in wages growth from the low rates of recent years as firms compete for staff in the tight labour market.
One source of ongoing uncertainty about the economic outlook is the behaviour of household spending. The recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates. Housing prices have also declined in some markets over recent months after the large increases of recent years. The household saving rate remains higher than it was before the pandemic and many households have built up large financial buffers and are benefiting from stronger income growth. The Board will be paying close attention to these various influences on household spending as it assesses the appropriate setting of monetary policy.
The Board will also be paying close attention to the global outlook, which remains clouded by the war in Ukraine and its effect on the prices for energy and agricultural commodities. Real household incomes are under pressure in many economies and financial conditions are tightening, as central banks increase interest rates. There are also ongoing uncertainties related to COVID, especially in China.”
Central banks are ‘front loading’ rate hikes to try and get on top of inflationary pressures. That is, rates are being lifted more quickly and more aggressively than usual. The fear is that if higher rates of inflation take hold – become cemented in people’s consciousness – then it will take longer to bring the inflation rates back to preferred levels.
The risk with these ‘harder and faster’ rate increases is that they could cause economies to go into recession. Recessions are defined differently across the globe, but in Australia, the general definition of a recession is two consecutive quarters of economic contraction (declines in gross domestic product).
What this means for your mortgage
For a typical owner-occupier with a $500,000 mortgage and 25 years remaining, this increase will see their monthly repayments rise by $137, according to RateCity.
Their total increase to date from the May, June, and July rate hikes would be $333 per month.
For a borrower with a $1 million mortgage, today’s decision will add $273 to their monthly repayments, bringing their total increase to $665 per month since April.
CoreLogic figures also showed national house prices fell for the second consecutive month in June by 0.6 %.
From the statement from the RBA:
“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”
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A credit score is a number representing your financial history. It is calculated using the information in your credit report, which includes your payment history, the number and type of accounts you have, the amount of debt you have, as well as the length of your credit history. If you’re in the market for credit or a loan, it’s in your interest to boost your credit score as much as you can.
Credit scores are taken into consideration by potential lenders and creditors when determining whether or not to approve an applicant for credit. For example, if you’re applying for a home or business loan your mortgage broker may discuss your credit score with you. It can serve as an indication as to how likely you are to pay back the loan.
Your credit score will typically sit on a scale of zero to 1,000 or zero to 1,200, depending on the credit reporting agency. Higher credit scores demonstrate responsible past credit behaviour, which may instil more confidence in potential lenders and creditors when they are evaluating a request for credit. If you have a lower score, financial institutions will be less inclined to allow you to borrow large sums. If they do, your interest rates may be higher – as motivation to repay the loan sooner rather than later.
Here’s a general breakdown of credit score ranges from the three major credit agencies in Australia:
|Credit Score Range||Illion||Equifax||Experian|
|Excellent||800 – 1000||833 – 1200||800 – 1000|
|Very good||700 – 799||726 – 832||700 – 799|
|Average||500 – 699||622 – 725||625 – 699|
|Fair||300 – 499||510 – 621||550 – 624|
|Low||0 – 299||0 – 509||0 – 549|
It’s important to remember that everyone’s financial and credit situation is different, and there is no perfect score that will guarantee better loan rates and terms.
Now that we’ve established what credit scores are all about, here are 5 tips to keep front of mind if you want to boost your credit score and establish or maintain responsible credit behaviours:
1. Pay your bills on time, every time.
A record of consistent and punctual payments can contribute to a stronger credit score. This includes all your bills. Late or missed payments on credit cards, mobile phones, utilities, or your rent may be reported to credit agencies, which will likely negatively affect your credit scores. If you’re having trouble with paying a bill, contact the service provider immediately to ask about alternative arrangements or payment plans. Avoid skipping payments, even if you’re contesting a bill. Creating a monthly budget and scheduling automatic payments for bills and other repayments could help you avoid late or missed repayments.
2. Pay off your debts promptly.
Again, having evidence of prompt repayments will contribute to a strong credit score. On the other hand, making late payments can damage your credit. Although paying off a debt can initially cause scores to dip temporarily, in general you could see an improvement in your credit as soon as one or two months after you pay off the debt.
3. Keep your credit card balance below the limit.
A higher balance compared to your credit limit may negatively impact your credit score. Keeping your balance low with consistent and on-time repayments will look good on your credit report. Limit new applications for credit or loan products where you can and if appropriate, consider lowering the limit on any credit cards you have. This will put a firmer limit on the amount of debt you can accrue.
4. Apply for credit cautiously.
Applying for multiple credit accounts within a short period may have a negative effect on your credit score. Whether you are approved or not, your application for a new credit or loan products will be visible on your credit report. Multiple applications for credit within a short time can flag to lenders that you are under credit pressure.
5. Check your credit reports regularly.
It could be worth checking your credit report carefully to ensure all the information listed is accurate. If your credit report does contain incorrect information, it could be having a significant impact on your overall credit score. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit agencies by visiting www.annualcreditreport.com. Checking your own credit reports won’t affect your credit scores.
By cross-referencing your credit report against bank statements and other financial documents, you may be able to spot inaccuracies on your credit report. In that case, you can contact the credit provider or the credit reporting body and ask them to amend your report. This could definitely help you boost your credit score.
If you’re interested in knowing more about credit scores, speak to the expert Geelong Mortgage Brokers at The Hrkac Group. when it comes to obtaining a home loan or business loan – whether it’s to purchase a home or refinance/consolidate your debts or purchase assets – the Geelong based brokerage team is there to help you with practical, effective financial advice.
We listen, we understand and we know what the best solution for your particular needs is. Our honest, knowledgeable Geelong Mortgage Brokers will give you the confidence to negotiate for your future so together, we can develop and maintain your wealth. Make an appointment today via contact us, or phone (03) 5221 2355.
If you want to break into the Geelong property market, you’ll likely find yourself in the market for a home loan. When searching for the ideal home loan for your needs, you have a few options available. You can do it yourself and visit the big four banks and various lenders in the hopes of discovering a deal that’s right for you. Or, you can engage the services of a local Geelong Mortgage Broker, who will do all of the groundwork for you.
To help you make a decision, we’ve created a list of 5 areas to compare the services of a Mortgage Broker against what you get from a bank.
1. Customer experience
When you visit a bank, you will only have their specific home loan options to choose from. They will explain their available products and recommend the one that most suits your needs. You will need to go through this process of talking through your options with multiple banks to make sure you are getting the best deal. If you decide on a home loan, the bank may put you in touch with a Lending Specialist to assist you with filling out your application.
When you choose to go through a Mortgage Broker, they will guide you through the entire process, start to finish. They can show you various options from lots of different banks and lenders, helping you compare rates, features and fees, all in one meeting. Your Mortgage Broker will ultimately connect you with a bank or non-bank mortgage lender and will be there to advise you through the application process.
2. Deal options
Banks can only offer you their own range of home loan products. The big four may have the largest range, with loans to suit most types of borrower, while smaller banks may have fewer options.
A Mortgage Broker has access to hundreds of loan products via their lending panel. This is a selection of 20-30 lenders, sometimes more, that the Mortgage Broker regularly does business with. They know all the ins and outs of each of these home loan products and can recommend the perfect one for you.
Many banks, particularly the big four, have a large selection of home loan products. And they might employ Lending Specialists who can provide advice similar to a Mortgage Broker. But only for the range of home loans they offer. Banks can also offer you package deals on other financial products, like credit cards and savings accounts. But these bells & whistles may distract you from the prospect of a better deal out there for you.
With a Mortgage Broker, you receive knowledgeable advice and guidance from a professional who has tabs on a wide range of home loan offers. They can instantly compare rates from their full panel of lenders and assist you through the application process. They work for you and their service is usually free.
Banks can only offer the limited home loan options they have available. They want you to sign up with them and understandably won’t tell you that there’s a similar or better product available somewhere else. They can’t offer independent advice and guidance.
With a Mortgage Broker, you will need to go through the application process twice; once with the Broker and once with the Lender, though they will guide you through both. And although their selection is much wider than a bank, a Mortgage Broker is limited to the lenders on their panel. It is also worth mentioning that while a Mortgage Broker works for you, their payment comes in the form of a commission from the lender you choose via their service.
5. Commissions and fees
Banks will typically charge an application or settlement fee, plus several other fees. Some banks charge more fees than others, and certain home loan products may have more fees than others available from the same bank.
Mortgage Brokers receive payment for their services through a commission from the lender you end up signing with. The majority don’t charge extra fees, there is no extra cost to you.
A Mortgage Broker can act as an intermediary between you and the bank. They research the hundreds of available home loans on the market so you don’t have to. They work directly with you to support you through the application and settlement process, helping you gain a full understanding of the paperwork and terms & conditions before signing on the dotted line.
If you’re in the market for a home loan, talk to our honest, knowledgeable Geelong Mortgage Brokers. The Hrkac Group Geelong Mortgage Brokers work with a large variety of lenders, both bank and non-bank, so we are able to ensure you are working with loan products that have all the features you need at a rate that works for you. We will work alongside you to guide you through your home loan application.
Make an appointment today via contact us, or phone 03 5224 2366.
When selecting a mortgage broker for your home loan, it’s critical to protect your interests by choosing the right one for your needs. If this is your first home purchase, this may be foreign territory. A mortgage broker should be able to guide you through the process, help you choose the right loan to finance your home, and facilitate the whole process. However, it’s essential you do your due diligence before choosing a mortgage broker.
Below we outline five key things you should take into consideration.
1. What are your available options?
Taking out a home loan is a big commitment, no question. You aren’t just going to go with the first result on a google search. Taking into account your financial situation, you need to carefully consider your available options to determine the type of loan you will need.
- How big is your deposit? The size of your initial deposit determines the type of home loan and interest rates you can qualify for. If your deposit is less than 20% of the purchase price of your prospective home, you will also have to pay Lender’s Mortgage Insurance.
- What loan features do you need? Do you require an offset account, extra repayments, or a redraw facility? Features such as these may save you money and provide flexibility.
- Fixed or variable interest rate? A fixed-rate home loan means your repayments will be the same for a set period; usually up to 5 years. This may help you with budgeting or save you from potential interest rises. Alternatively, a variable rate home loan is subject to the current interest rates in the market.
- Can you afford the monthly repayments? Take stock of your monthly finances. Go over all of your incomings and outgoings and be realistic about what you can afford.
2. Have you researched your broker?
Ask your mortgage broker about their qualifications and experience. Ideally, they will have many years of experience and a portfolio of satisfied customers. Make sure they are licensed to provide you with a loan. They should have their own Australian Credit Licence or be qualified to act as an authorised Credit Representative, as required by the Australian Securities and Investments Commission (ASIC). Some other accreditations to look out for include:
- Have a Certificate IV in Finance and Mortgage Broking
- Accredited under the National Consumer Protection Act
- A member of the Mortgage & Finance Association of Australia (MFAA) and/or the Finance Brokers Association of Australia (FBAA)
If any of your family or friends have recently gone through this process with a broker, you should ask them about their experience. Were they happy with their broker? What they would do differently next time? What are some things they would look for in their next broker?
3. Who is on your broker’s lending panel?
Brokers are restricted by a list of banks they can access loans from, this is known as their “lender panel”. A good broker will have a range of lenders on their panel and regularly engage the services of the full range, depending on the borrower’s circumstances.
Check if the broker has a range of reputable institutions. If not, you may miss out on better deals. Make sure your broker can explain how many lenders they have on their panel, how many they use, and why.
4. What are the fees, charges & commissions?
A broker is required by law to clearly explain and demonstrate how they are remunerated. Most brokers receive a percentage-based commission for their work, paid by the bank that is providing the loan. There is no cost to you.
5. Do you have a list of questions ready to go?
It’s always a good idea to have a list of questions for your broker handy to help you make your decision. Here’s a list to help you get started:
- What is your ownership structure? Ask your broker who owns them. Some are owned or part-owned by banks. Research shows that broker companies owned by big banks send more loans back to their parent company. A good broker won’t be influenced by their ownership structure and will recommend a wide range of loans from across the market.
- Can you provide a credit assessment? A broker is legally obliged to follow responsible lending laws and should never sell you an inappropriate loan. They must assess your income and expenses along with your financial objectives and expectations. This is all contained in a document called a credit assessment.
- Can you supply me with a credit guide? A broker is legally required to provide you with a credit guide. It encompasses the broker’s contact details and a record of the commission the broker will receive if you go ahead with the loan.
- How many lenders are on your panel? This will let you know how many loans a broker can look at for you – some have lots of options but others offer a surprisingly limited selection.
If a broker can’t answer basic questions about charges, commissions, and ownership structures, this could be a warning sign. A good broker should always be transparent about their business and services.
When it comes to obtaining a home loan the Geelong-based brokerage team at the Hrkac Group is there to help you with practical, effective financial advice.
We will help you find the best home loan solution for your particular needs. Our honest, knowledgeable mortgage brokers will give you the confidence to negotiate for your future so together, we can develop and maintain your wealth.
Make an appointment today via contact us, or phone 03 5224 2366.
The idea of purchasing a property is daunting enough whether it is your first home or another addition to your investment portfolio. Add in the idea of the mountain of paperwork that goes along with obtaining a home loan and it may seem impossible!
The paperwork lenders require can be significant, and it’s important to provide the correct documentation and completed checklists. Sending your home loan application with missing or incorrect documents can result in your loan application going back and forth without result or even derail the application altogether.
After evaluating the risk involved with repaying a loan, lenders will decide whether or not your application will move forward. While requirements may vary from lender to lender, there are some key criteria commonly used to assess the risk of a client.
The first and foremost area your lender will look into is how much you earn, as well as how stable your earnings are. They want to make sure you can consistently make repayments to your loan and are maintaining continuous employment. Bank statements, payslips, group certificates, and tax returns are among the documents required to give evidence of your income.
Although the overall number in your bank account is taken into consideration, lenders look at whether you are capable of saving over the long term. A bank account statement showing regular deposits is an example of a required document. In the lead-up to applying for a home loan, think twice about buying your daily coffee or eating out multiple times a week. Instead, deposit this money into your savings account. It is not uncommon for applications to be rejected if a savings history is deemed not to be genuine, for example, if the majority of savings have been given as a gift.
To better determine your financial situation, lenders want to see proof of your assets and liabilities, including savings, shareholdings, and motor vehicles or an additional form of income. The Hrkac Group team can advise you on the specific paperwork requirements, as each lender can differ.
In order to determine that you have been able to make any previous credit card repayments and bill payments, lenders will look at copies of credit card and personal loan statements. Keep in mind that it’s not only just your credit card, home loan, or personal loan repayments they’ll look at, but also any mobile phone and utility bills.
Buying a home is a big step in everyone’s lives and there are certainly many hoops to jump through along the way. The team of Mortgage Brokers at The Hrkac Group aims to make the process of gathering all the necessary paperwork and applying for a home loan as simple and stress-free as possible.
Call us today to arrange an appointment.
Today’s Home Loan market is a complex proposition for potential borrowers, from First Home Buyers through to experienced property investors. Engaging a Mortgage Broker to assist you can make all the difference in being able to find a suitable loan from a maze of lenders, with complex lending rules and regulations currently in place. A mortgage broker can do all of the leg work for you, including checking your borrowing capacity and ensuring you meet the lending criteria, of dozens of lenders, and you choose who you want to deal with.
It is important to note that a Mortgage Broker is required to work in your best interests by law, and consumers have legal protection if a Broker doesn’t do so. Hrkac Group Mortgage Broker’s don’t charge any fees to our clients. If we do our job properly, and locate a suitable loan for our clients, the Lenders will pay a commission to us. The commission isn’t added to your loan amount or interest rate, so it is a completely free, ethical and professional service we provide.
Why use HRKAC’s Mortgage Brokers:
1) We’re thorough
We discuss and analyse your existing situation, your home loan needs and requirements, and obtain all necessary information pertaining to your home loan application.
2) We make it simple
We explain the types of home loans available to you from a range of banks and specialist finance companies. Such as:
- Home Loans
- Investment Home Loans
- Vehicle & Equipment Loans
- Small Business Loan
- Debt Consolidations
3) Specialised & personalised service
Based on the information provided by you, and utilising specialist home loan software, we match your home loan requirements to a selection of home loan products offered by our panel of lenders.
4) Overview of costs
We provide an overview of your ‘Purchase Budget’ incorporating the relevant costs associated with your home loan application in writing.
5) In-Depth view of products
We provide an in-depth overview of the home loan product or products you select, in writing.
6) We do the tricky parts
We complete and package your home loan application and deliver it to the lender’s assessment team on your behalf.
7) We dot the i’s and cross the t’s
We act as an intermediary between you and the lender, negotiating the terms and conditions of your loan. We will also answer any questions the lender’s assessment team may have, on your behalf.
8) Communicate with all parties
We liaise with your solicitor, real estate agent and accountant, and any other related parties to ensure a smooth and timely settlement.
9) Going the extra step
We assist with any future home loan requirements, whether you wish to check, change, or top-up your loan, or renegotiate your current home loan interest rate with your existing lender.
10) Keeping you updated
We act as a valuable information service beyond the settlement of your loan by providing you with relevant information on the home loan market, updates on products, and special offers that may be of interest to you.
Geelong Finance brokers and Conveyancing teams at The Hrkac Group were pleased with Interest Rate Reduction announcement.
The Geelong Finance and Conveyancing team is pleased that just moments after the Reserve Bank Australia (RBA) announced it would cut the official cash rate by 25 basis points, two of the majors have announced they will pass on the full rate cut to borrowers.
In an announcement on its Twitter feed, National Australia Bank said it would cut its standard variable rate by 25 basis points. CBA has also just announced that they are passing on the full 0.25% reduction. The rate cut takes NAB’s SVR to 6.13 percent and CBA’s to 6.15 percent. More are expected to follow.
This is the first time in a long time that any of the majors have chosen to pass on the RBA’s rate cut in full.
Contact Us now at The Hrkac Group Finance Broker team to review your business and personal loans and ensure you are benefiting from the low official cash rate.